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The many extracts on these pages are from copyright material. They are owned by the reference given or its owner. They are reproduced here for educational purposes and to stimulate public debate about the provision of health and aged care. I consider this to be "fair use" in the common interest. They should not be reproduced for commercial purposes. The material is selective and I have not included denials and explanations. I am not claiming that all of the allegations are true. The intention is to show the general thrust of corporate practices as well as the nature and extent of any allegations made.

The Settlement
The Response

This page describes the investigators and regulators, the negotiation process which resulted in a fraud settlement, the nature of the fraud settlement and its inadequacies, the inappropriate response of many of those involved, and finally back to business.



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The Investigations

The investigations of the analyst and share spinning frauds were triggered by the revelations when large companies like Enron and WorldCom collapsed. They had been promoted by analysts to the bitter end. Without these collapses no one would have known. One can only speculate about the extent of the practices. Most of the multinational financial institutions were involved. The number of companies that resorted to fraud as a consequence of the pressures generated by the analysts unrealistic reports is unknown. The extent of the problem globally is unknown.

How Similar to Health Care

The way these investigations were handled gives an insight into the way systemic corporate misconduct is managed when contrasted with misbehaviour by individuals and small companies. We learn much more about the sort of processes which allowed Tenet (previously National Medical Enterprises) to survive the scandals of the early 1990's only to offend again in the 21st century, and Columbia/HCA to resurrect itself as HCA. Vencor's (now Kindred Healthcare) US $1.3 billion fraud was reduced to a US $213 million fine to keep it in business. Smaller groups in contrast are summarily punished and banned from Medicare. There is one law for the rich and powerful and another for the rest.

It is possible to argue that the consequence for the health system of crushing a company or even a whole health care sector were so great that all parties fell over backwards to minimise the impact. This justification obscures the fact that the old boys network, lobbying and campaign donations all play a major part in greasing the political wheels. The legislative response to giant corporations' misdemeanours has seldom been much more than tokenism.

Effective punishment and pressures to addresses the underlying causes of the problem were effectively blunted. Without real change to the competitive corporate health marketplace the cycle of fraud and misuse of patients continues to spiral upwards - to the extent of doing unnecessary and risky cardiac surgery to boost profits.

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Similarities on Wall Street

A very similar situation to that we saw in health care existed on Wall Street. What mattered more than retribution for the crimes committed or reform was the loss of investor confidence, and the impact on the US economy. Market ideology was seriously challenged and no one was ready to confront this.

All parties were anxious to get the never ending revelations off the front pages so that the market could "put it behind them", investors could forget, and everyone could get back to business. Banks angrily accused Mr Spitzer, the attorney general of New York of allowing material to become public - the implication being that all of the parties had agreed that the public be kept in the dark.

This splat needs to be seen in the context of the other 3 active participants in the fraud investigation. All were dominated by corporate appointees who had to be driven to take effective action. Making material public gave them no choice. It is also obvious that the big corporations exploited this eagerness to resolve the issues during the negotiations. Publicity made it more difficult for them.

Sensible reflection on the past history of the market shows that the frauds occurred because all this is exactly what the market has done on many previous occasions. Without genuine change it will do it again, perhaps in some other area. Wall Street shows the same spiral into increasingly damaging and bizarre practices that we saw in US health care.

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Political Influence on the settlements

On other web pages I have documented the political donations and intense lobbying undertaken by Enron, accountants and financiers including Citigroup (donations and lobbying and more) . Mr Levitt described the intense pressures to which he was subjected by congressmen and senators when as chairman of the SEC he proposed tighter regulations and restrictions on unfettered market activity.

Mr Spitzer, the US attorney general was subjected to similar pressures and a personal attack when he targeted the Wall Street financial giants. Efforts were even made to pass legislation limiting state regulators right to prosecute securities fraud. This would have killed off the only independent investigator of the banks and left it to industry groups and their republican allies.

Eliot L. Spitzer, the New York attorney general, disclosed today that his investigation of conflicts of interest among Wall Street research analysts included a review of whether some analysts improperly or fraudulently promoted shares of WorldCom.

Mr. Spitzer, who has already secured a $100 million settlement from Merrill Lynch, lashed back at Republican critics in Congress today, including Representative Michael G. Oxley of Ohio, chairman of the Financial Services Committee, and Representative Richard H. Baker of Louisiana, chairman of the capital markets subcommittee, two of the most powerful House members on Wall Street issues.
He also condemned efforts by Wall Street lobbyists to persuade lawmakers to adopt legislation that he said would "eviscerate the ability of the states to prosecute securities fraud."

Later, Mr. Spitzer added that Mr. Oxley "simply does not understand that aggressive action is necessary" and that he "seems intent on undercutting my efforts and those of other state regulators seeking to enforce state laws to protect consumers."
In statements issued this afternoon, both men attacked Mr. Spitzer in personal terms. Mr. Baker called him a "failed investor" who did not understand markets and was "making up his own rules about how to protect all other investors." Mr. Oxley contended that Mr. Spitzer's "actions also threaten to split our national markets in a million pieces, so that every firm would have to reach settlement with every attorney general."
But one Republican, Senator John McCain of Arizona, strongly came to Mr. Spitzer's defense.

"Anybody who says you shouldn't have done what you did does not have the interests of investors" at heart, Mr. McCain said at the Commerce Committee hearing this morning.
Mr. McCain also told Mr. Spitzer he was confident a "majority of U.S. senators" would oppose legislative efforts to curtail state investigations into Wall Street.
TURMOIL AT WORLDCOM: WALL STREET; Spitzer Says WorldCom Was Part of Investigation of Analysts The New York Times June 27, 2002

A heavy handed disregard for the views and interests of the public and even of their elected representatives is not new. We have seen the unwillingness of government regulators to crack down on giant health care corporations who stretch the limits. Health and aged care chains play legal hard ball when regulators accuse them of mistreating patients tying regulators up and wearing them out.

This sort of behaviour was apparent with Citibank as long ago as 1991. Big corporations capitalise on their power and play hard ball to keep regulators at bay for as long as possible. Citibank's response after the market scandals and imprisonments of the 1980s is representative. It seems that Citibank was in serious trouble at this time because of its international lending policies and almost collapsed. The ruthless and deceptive response to those the bank had once courted is reported on another page.

Scarcely three months ago, with Mr Milken finally in jail and the worst of the S & L debacle apparently behind them, US prosecutors and regulators were declaring an end to the crime wave that seemed to grip America's financial markets in the late 1980s. View From Manhattan: More scandal is on the cards The Independent (London) September 7, 1991

Despite its problems, regulators have not required Citibank to sign any formal agreement on how it will run its business similar to understandings regulators have reached at 518 other banks across the country.
"Citicorp has at times taken advantage of its position as the largest bank in the country to resist a lot of regulatory pressure," said a former regulator - - - . Regulators, he said, refrained from "taking public action that could cast an adverse market perspective on Citicorp because they were afraid of causing the very problems they wanted to avoid."
Today, the bank still has liquidity, but it has failed to accumulate a strong capital base and is now the only one of the nation's 25 largest banking companies not to meet the minimum standard for shareholder capital to equal 4 percent of risk-adjusted assets by the end of next year.
"There is a double standard on the part of regulators, where they refrain from open criticism of some of the biggest banks because they worry about adverse consequences," said Michael Iovenko, a partner at the New York law firm of Breed Abbott & Morgan and a former bank regulator.
In the case of Citicorp, regulators have not published any written agreements, though it is known that they have prodded the company for many years to increase its capital.
After years of rejecting suggestions by regulators and banking analysts that a stronger capital base is desirable, Citicorp's chairman, John S. Reed, now says that "I know when I'm beat."
Citicorp: Too Big for Public Dressing Down The New York Times November 4, 1991

To achieve his goals, he (John Reed)- - - - - then sharply scaled down, a once formidable corporate banking business that nearly brought Citicorp to ruin in the early 1990's.
He said his worst memories were of the real estate and international lending fiascos that left the bank teetering on collapse in the early 1990's.
Reed Announces Plans to Step Down as Co-Chief of Citigroup The New York Times February 29, 2000

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Settling the Allegations

Of interest is the manner in which the banks behaved when they were accused and charged with exploiting the vulnerability of those they claimed to serve.

The frauds exposed over the last 3 years are really a continuum of the frauds and settlements of the last decade of the 20th century extending into the 21st. The web of fraud and antisocial practices was so wide that it is sometimes difficult to know from the reports which settlement addressed particular issues. There were a number of settlements.

The Enron and WorldCom frauds were separate entities for the bankruptcy courts, and for the prosecution of company offenders. There were multiple other collapsed companies in similar trouble but these two stand out because of their size, and the number who were defrauded. Repeat offender, Arthur Andersen the auditors for several of the companies were penalised separately and went out of business.

The investment banks were integral to each of these interlinked scandals. Their slimy fingers were busy greasing all of these events in order to fill their own vaults with dollars. Investors who believe that they have been defrauded now want those dollars and are chasing after them.

There have been two mains areas of regulatory action directly against the banks. The first action related to the analysts and the share spinning. It ended as a cooperative endeavour between the New York attorney general who led the charge, the US Securities and Exchange Commission (SEC), the National Association of Securities Dealers (NASD) and the New York Stock Exchange which insisted on a rapid resolution. Only this settlement is examined on this web page.

The second major fraud settlement involving the banks was an investigation into the way the banks, but particularly Citigroup and Morgan Chase, connived and assisted in the Enron fraud using structured finance. This was also an example of a wider problem where the banks had connived in corporate fraud with large companies. This settlement is described on the Enron page.

It has simply not been possible to track and document all of the settlements surrounding bankruptcies in the USA to see what the banks did in each - and much of the information may not be publicly available. It is clear that WorldCom and Enron were only representative parts of the wider problem.

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The US $1.4 billion Fraud Settlement

But the regulators found fault with every major bank on Wall Street.
In settling the cases, the firms neither admitted nor denied the allegations, following the standard practice in resolving such disputes with the commission.

The US $1.4 billion settlement essentially involved paying only about 7% of one years income and making some changes designed to paper over the cracks that were exposed by the system. Estimates of the total amount defrauded range as high as US $7 trillion. Only two lesser individuals were penalised and no one went to prison.

The agencies that negotiated this paltry settlement made a show of being very critical of banking practices. They boasted of the settlement and the new regulatory conditions imposed. They claimed that the way that the companies operated would be changed for ever. This duly made the headlines but more sober reflection reveals a different picture. Particularly revealing are the parties involved and the priorities that governed the settlement.

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The Regulators

Mr Spitzer, the New York attorney general was a politician with ambitions and he was motivated to bring these people to justice. He was publicly outspoken and very active.

The SEC (US Securities and Exchange Commissions) was a government appointed body responsible for monitoring the market, investigating transgressions and taking punitive action. Mr Harvey L. Pitt, chairman of the SEC had been an aggressive critic of the previous chairman Mr Levitt. Levitt was a vocal opponent of corporate self regulation and a supporter of transparency and oversight. Pitt acted for the accountants whose activities Levitt wished to constrain.

President Bush's ideological orientation is well illustrated by his appointment of Pitt to replace Levitt when he became president. Pitt and Spitzer did not see eye to eye. Pitt's position became untenable and he was replaced. President Bush appointed William H. Donaldson a multimillionaire former investment banker and former chairman of the New York Stock Exchange to replace him and deal with the investment banking scandal. The SEC generally brought up the rear and took some of the actions that resulted in settlements.

With Harvey L. Pitt, the current S.E.C. chairman, under heavy fire to resign after a series of political gaffes, and his agency in disarray, some investors are growing concerned that their desires for additional overhaul are not being recognized in Washington. Pipeline to a Point Man The New York Times November 3, 2002

Levitt's chief opponent in his battle against the accountants was a lawyer named Harvey Pitt, who argued that the New Economy would benefit from accountants doing more consulting. Pitt, appointed by George W. Bush to be Levitt's successor, was recently forced to resign his position at the S.E.C. Buy Cheap, Sell Dear The New York Times November 24, 2002

The NASD (National Association of Securities Dealers ) was a regulatory industry body with wide powers to investigate, fine and bar individuals from particular markets. It kept records on individual analysts and registered them. It was the one place where they could not plead the 5th Amendment and refuse to testify.

The NASD had little choice but to act against the individuals responsible by fining and banning a few analysts. The fines were not large when compared with the annual earnings of these analysts Unless those banned had been excessively extravagant they would have enjoyed a luxurious retirement, particularly when compared with many of the bankrupted retirees who suffered from their actions.

It is a violation of securities laws for an analyst to have two views on a company, one for public consumption and one for private use. And NASD rules forbid an analyst to maintain a rating or price target on a company's shares that is not based on sound reasoning or that overlooks evidence that could disprove the analyst's argument. Wall Street Star May Face Suit By Regulators The New York Times January 4, 2003

Mr. Weiss (lawyer) said he hoped the filing would bring attention to what he called the inequities of the arbitration process at NASD, which is run by securities firms and provides industry oversight.

"The entire arbitration scheme has not been addressing what has happened," Mr. Weiss said about problems with the arbitration process, which he says favors the investment firms over investors. Salomon Arbitration Cases The New York Times January 14, 2003

A hidden but powerful agent in the settlement was the New York Stock Exchange. Its chairman Richard A. Grasso played a major part in arranging the settlement.

Grasso was a rather controversial figure himself. He seemed to have little grasp of the social realities of what was happening. Incredibly he proposed that Citigroup's Sandy Weill should join the stock exchange's board. Weill's involvement with Grubman and with Citigroup in the Enron scandal was front page news at the time. With a friend like this it should be no surprise that Weill walked away from the inquiry without penalty. Grasso too was deposed soon after this.

A number of congressional committees investigated, subpoenaed material, and interviewed those involved. Large numbers of incriminating documents were obtained in this way.

Also involved along the way were the United States attorney's office, and the North American Securities Administrators Association.

The bankruptcy court appointed a special investigator who turned up more information. Standing in line for time in court were the millions of investors who had been defrauded. They were looking for many billions in compensation.

In effect Spitzer was working and pushing along three regulatory bodies which were largely staffed by the market and responsible to it or to their political supporters. While an aggressive public face was essential these groups would have a natural tendency to be sympathetic to the bankers. After the settlement Spitzer drove home the Levitt message.

Mr. Spitzer attacked "an overarching effort to deregulate the financial services industry over the last 20 years."

He said, "I think we may now be paying the price for that deregulation," which came amid reassurances from investment and commercial banks that they could police themselves. Senators Question Effectiveness of $1.4 Billion Settlement The New York Times May 8, 2003

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The Priorities

Behind all the rhetoric and putting pressure on Spitzer was the desire to get this over with. Investors had deserted the markets and the economy was suffering. The entire marketplace and probably the government wanted to get this over as soon as possible so that the marketplace, the heart of America could get back to the business of wealth creation. The prospect of a protracted process with ongoing headlines fuelling public distrust was untenable. President Bush had an election in 2004 and these were his supporters.

On the other hand if "investor confidence" (read trust) was to be restored the settlement had to look credible and it was essential that investors should see the system as changed. The banks themselves realised this and had to give up any hope that they could show that their practices were legal which they may have been able to do. The issues were not so much legal as moral and social.

But, in the end, the urge to reach an agreement was overwhelming.

The $7 trillion in losses that investors have suffered since 2000 along with revelations that some research analysts had recommended stocks while privately warning their big clients against them have made small shareholders deeply suspicious that the markets are rigged against them. That has not only made it difficult for companies to raise the capital they need to expand but has also become a huge drag on the American economy.

"Problems in the stock market are having a very serious economic impact," said David L. Roberts, senior international economist at Banc of America Securities.
In a worst-case possibility, regulators could have destroyed Wall Street in order to save it -- insisting on trials that could have ruined its credibility permanently.
Although the firms were hardly anxious to agree to the terms, which represented the biggest restructuring of their business since at least 1975, when the New York Stock Exchange deregulated commissions for stock trading, they understood that they needed to make major changes to win investors' confidence.
With the stock market remaining weak, securities industry officials, regulators and -- finally -- Wall Street executives realized that a settlement was needed to bolster investor confidence.
How Wall Street Was Tamed The New York Times December 22, 2002,

In fairness to the regulators, they had to take into account other considerations in fashioning the settlement. Tougher action on the nation's top investment firms could have dealt a terrible blow to important institutions at a difficult time for the capital markets. Settling for Less The New York Times December 27, 2002

The agreement would help to bring an end to "one of the darkest chapters in the history of modern finance," said Richard A. Grasso, the chairman of the Big Board. Wall St. Deal Says Little About Individuals The New York Times December 21, 2002

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The Negotiations

These were negotiated settlements. How appropriate is it that those who have raped society should be able to negotiate their punishment? There is a very different law for the high and mighty in the corporate world.

Spitzer a state attorney was taking on the might of Wall Street, and those he had to work with to prosecute the case were all from the competitive marketplace. Some were bankers and colleagues of the accused.

The financial and banking conglomerates faced a major challenge to their credibility and were threatened by very costly actions for damages. The actual fine was less important than the risks the wording of the settlement posed for costly litigation from investors. Figures of US $10 to $30 billion in compensation have been quoted, but it is not always clear whether the higher figures include the Enron fraud.

There was intense haggling about the use of the word fraud. Regulators insisted that the three largest culprits accept this. Some banks claimed that they were not major participants and should pay less. In addition some hoped that they could get their insurers to pay some of the fine. This angered critics, insurers and Mr Spitzer.

It is likely that there was a great deal of denial in that the companies, initially at least did not believe that they had done anything wrong - meaning illegal.

To begin with there were three regulatory agencies and 10 banking corporations all acting independently and trying to negotiate separate settlements with separate agencies.

The changes which the banks would have to make so that this would not happen again were negotiated. If these seriously crippled the bank's commercial activities they would be unacceptable, and would impact on the markets viability. The banks argued this strongly.

One wonders if any other felons would have regulators falling over backwards to accommodate them and their individual agendas.

In negotiations with Merrill Lynch's lawyers, Mr. Spitzer and his staff demanded that Merrill split off its research department as a separate unit. Officials at Merrill and other Wall Street firms scoffed at the idea as naive, but Mr. Spitzer has not backed down. Investor Discontent The New York Times April 12, 2002

But the two sides were having a hard time locking down the details of which firm would pay how much and exactly which practices would be banned and allowed.
After two months of intense negotiations, after hundreds of meetings and conference calls between the regulators and the firms, each side understood what the other wanted. "We had been very fair in the process of looking at all of the concerns raised by the firms," Ms. Schapiro said. "We were very much down in the weeds, and it was time to bring it to the end."
The negotiations were exhausting, said Barry R. Goldsmith, executive vice president for enforcement at the NASD. Since October, the firms held almost two dozen industry wide meetings with regulators to discuss how to make research independent of investment banking. Individual firms, meanwhile, held hundreds of one-on-one meetings with regulators to negotiate the penalties they would face for misleading reports they had released.
But in early November, tension surfaced between Mr. Spitzer, whom the industry resented for instigating the investigation, and the banks. - - - - Theodore A. Levine, the top lawyer for UBS, accused the regulators of leaking details of the talks.
Regulators also wanted new restrictions on "spinning," the practice of allocating shares of hot public offerings to corporate executives at companies from which the banks hoped to win business. Regulators viewed spinning as little more than legalized bribery.
The fight over how much each firm should pay threatened to derail the talks.
Before that (Mr Grasso's intervention), negotiations had not been coordinated; each regulator had presented each bank with individual settlement terms.
How Wall Street Was Tamed The New York Times December 22, 2002,

Now that the biggest firms on Wall Street have agreed to pay $1.4 billion to end investigations into the behavior of their stock analysts, some are trying to get their insurance companies to write the checks.
Citigroup, which agreed to a $300 million fine and another $100 million in payments, is among the firms hoping to recover at least part of its share of the settlement, the people said.
Mr. Spitzer has made his position clear. "As a matter of public policy, fines and penalties should not be recoverable from any insurance policy," he said - - - .
Wall St. Firms Want Insurers To Cover Fines The New York Times January 18, 2003

Indeed, they (bankers) have spent the past four months negotiating every last sentence in the findings to do what they can to limit their liability. Still, despite having increased their legal reserves, experts estimate that the cost to firms for settling government and civil litigation could exceed $10 billion in the coming years. Analysts to Pay Millions in Fines New York Times April 28, 2003

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Grasso Steps in

The stock exchange was more alarmed than anyone. This was the heart of the capitalist system and it was bleeding as a result of investor distrust. The longer it dragged on the worse it became. The marketplace did not want this in court nor did they want multiple separate settlements detailing each of the disturbing findings over and over again.

Richard Grasso, the chairman of the stock exchange stepped in and summoned the regulators to meetings where they hammered out a unified approach. He also put his strong arm on the bankers who were holding out for more concessions.

The object was to restore confidence in the market and get back to trading. This became an exercise in managing distrust of the market, not in addressing its core problems.

The stock market desperately wanted to " put this behind us". That the history of corporate fraud shows you can't solve these problems by putting them behind you was not a consideration.

Instead of putting this behind them this fraud needed to be kept right up front by all parties, but particularly the companies and the public. It needed to be kept there for as long as it took society to progressively bring the marketplace back under control.

Richard A. Grasso, the chairman of the New York Stock Exchange, was determined to prevent that (going to trial) from happening.

On Oct. 1, Mr. Grasso mediated. He invited top officials from the S.E.C., the NASD, the Big Board (stock exchange) and the New York attorney general's office to a dinner at his club, Tiro a Segno.
Over dinner, the regulators reached a broad understanding about their responsibilities and the goals of the inquiry. Mr. Pitt agreed that the S.E.C. would not try to take over Mr. Spitzer's investigation. In turn, Mr. Spitzer acknowledged that the S.E.C. had the ultimate duty to oversee the structure of the securities industry and that he would not try to usurp that role.

And all the regulators agreed that their goal should be reform of the industry, not penalties so punitive that they would permanently damage Wall Street.

Over the next month, two more dinners followed, which the regulators joked were "the meetings of the four families." But given the complexity of the investigations and the negotiations, having regular top-level contact was very important, said Ms. Schapiro of the NASD.
The most crucial meeting came in mid-October at S.E.C. headquarters in Washington, when officials from the S.E.C. and Mr. Spitzer's office first presented the outlines of an overall settlement to the banks. "It was clear that they would listen," one regulator who was present at the meeting said. "It was also important that we had all of them at once."
But Mr. Grasso felt that because almost every firm had engaged in at least some of the practices under investigation, an overall settlement would be the only way to clean the stain attached to Wall Street. Though the Big Board was one of the regulatory agencies doing the investigating, Mr. Grasso had the respect and confidence of both sides, and he helped broker the deal.

"Grasso really represented a catalyst, to keep on emphasizing how important it was as an industry to put this behind us," one person close to the negotiations said. How Wall Street Was Tamed The New York Times December 22, 2002,

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Turning on the Pressure

Spitzer knew that the banks must settle and dared not go to court. He probably also realised that he needed to quit while he was on top and had the support of the other regulators and of Grasso. He turned the pressure on and gave the banks an ultimatum. They settled.

"The regulators started putting enormous pressure on," said Mary L. Schapiro, vice chairwoman of the NASD, in an account echoed by several other people involved in the negotiations. "We had really been through these issues many, many times. We felt this wasn't going to get better as it got older."
The lawyers sat down. Without preamble, Mr. Spitzer launched into a lecture. According to people present, he said negotiators were tired of the waffling, the nitpicking. "Today's the day," he said. "Sign up or we're going into law-enforcement mode."

In less than 20 minutes, the meeting was over. Demonstrating his intent, Mr. Spitzer stalked out of his own office before his guests.
But by Wednesday, Mr. Grasso and regulators had applied so much pressure to the second-tier firms that they gave in.

Then Mr. Spitzer gave his speech, and on Thursday a frantic round of faxes and negotiations ended with an agreement in principle.

"Ultimatums were delivered -- bottom-line numbers," Mr. Goldsmith said. "It got to a point where time was running out here -- either you're on board or off board." How Wall Street Was Tamed The New York Times December 22, 2002,

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The Settlement

The new SEC chairman Donaldson made the announcement about the fines and the agreements entered into making much of their effectiveness. It was in the interests of the marketplace for the settlement to be accepted and of the bankers to show contrition and demonstrate that they were complying.

They could not pretend that the fine was really a deterrent or that the punishment fitted the crime. Instead they claimed that the way that the companies operated would be changed for ever. This duly made the headlines. A more sober reflection reveals a different picture and as they reflected on this the press became more sceptical.

The changes if they can be enforced which is questionable, may help to contain the particular fraudulent conduct but it does nothing about the real problem - the wider problem of the upward trend in corporate misconduct. Patching one hole in a rusty bucket does not put an end to the problem of leaks. It will soon break through somewhere else. That issue is definitely not on the agenda.



Merrill Lynch, the Salomon Smith Barney unit of Citigroup and Credit Suisse First Boston issued fraudulent research reports.

Bear, Stearns; First Boston; Goldman, Sachs; Lehman Bros.; Merrill Lynch; Piper Jaffray; Salomon Smith Barney; and UBS Warburg issued research reports with "exaggerated or unwarranted claims."

First Boston and Salomon Smith Barney engaged in "inappropriate spinning" of hot new stocks. They sold shares to top corporate executives in return for banking business from the executives' companies. The executives could then sell the stock at a profit.

Without admitting or denying the charges, the firms agreed to pay $875 million in restitution and fines. About $387.5 million will be available to repay investors who were harmed; the rest will go to New York and other states that investigated the suspect practices.

Investors who receive restitution will still be able to pursue claims against the securities firms.

The firms agreed not to deduct the fines from their taxable incomes or ask their insurance companies for reimbursement. WALL STREET SETTLEMENT: MARKET PLACE; In Wall Street Hierarchy, Short Shrift To Little Guy The New York Times April 29, 2003

The fines, restitution and other penalties were divided as follows: $400 million will be paid by Citigroup; $200 million each by Credit Suisse and Merrill Lynch (which includes an earlier Merrill settlement of $100 million); $125 million by Morgan Stanley; $110 million by Goldman Sachs; $80 million each by Bear Stearns, J. P. Morgan, Lehman, and UBS Warburg; and $32.5 million by Piper Jaffray. WALL STREET SETTLEMENT: THE OVERVIEW; 10 WALL ST. FIRMS REACH SETTLEMENT IN ANALYST INQUIRY The New York Times April 29, 2003


Dec 2002
The agreement is not final, but regulators were rushing yesterday to prepare an announcement to put an encouraging cap on a year fraught with corporate scandal.

The agreement is a result of roughly five months of fractious negotiations between the firms and securities regulators. It is intended to force Wall Street to produce honest stock research and to protect analysts from pressure within the firm to issue upbeat forecasts to attract investment banking fees. Under the terms of the deal, brokerage firms will also be barred from dispensing hot stocks to top executives or directors of public companies.
In agreeing to the fines, the firms would neither admit nor deny charges that they had misled investors.

When securities regulators announced a $1.4 billion settlement with the 10 biggest firms on Wall Street yesterday, they described a litany of misconduct that had harmed investors, but they did not name many names.
The other (exception) was Mr. Grubman's former boss, Sanford I. Weill, the billionaire chairman and chief executive of Citigroup, the parent of Salomon. Alone among Wall Street executives, Mr. Weill was cleared by the agreement that regulators announced yesterday.
That assurance was critical to Mr. Weill -- and to reaching a tentative accord with the 10 firms -- because his conduct was a subject of investigations by Mr. Spitzer's office and the regulatory arm of NASD.
Although the $1.4 billion represents only a fraction of the firms' assets and an even smaller portion of the aggregate losses investors suffered when the stock bubble burst in 2000, regulators said it was enough punishment.
Wall St. Deal Says Little About Individuals The New York Times December 21, 2002

April 2003
Ten financial groups including world number one Citigroup were snared in the scandal, blamed for shattering investor confidence and sending shockwaves around world financial markets.
World number one Citigroup's brokerage arm, Salomon Smith Barney, took the heaviest blow with a record fine of $US150 million.

In related actions, two star stock analysts during the 1990s market boom - Citibank's Jack Grubman and Merrill Lynch's Henry Blodget - were fined and barred for good from the industry.
If an analyst signed a research report supporting a stock while privately admitting to doubts, "the only appropriate reaction is outrage," Donaldson said.
As part of the settlement, Credit Suisse First Boston (CSFB), Merrill Lynch and Citigroup's brokerage unit were found to have issued fraudulent stock research reports.
'Biased' Wall St firms fined $2.26bn Australian Financial Review April 29, 2003

Mr. Blodget is expected to pay a $20 million fine and $2 million in "disgorgement" - - - - - - Mr. Grubman will pay $15 million to make his settlement with NASD without admitting or denying wrongdoing.

The former analysts (Blodget and Grubman) are the only individuals who are expected to be part of the settlement into conflicts among Wall Street stock research analysts. Analysts to Pay Millions in Fines New York Times April 28, 2003

The Securities and Exchange Commission, state prosecutors and market regulators accused three firms in particular -- Citigroup's Salomon Smith Barney, Merrill Lynch, and Credit Suisse First Boston -- of fraud.
At firm after firm, according to prosecutors, analysts wittingly duped investors to curry favor with corporate clients.
"These cases reflect a sad chapter in the history of American business -- a chapter in which those who reaped enormous benefits based on the trust of investors profoundly betrayed that trust,"
said William H. Donaldson, the new chairman of the Securities and Exchange Commission. "The cases also represent an important new chapter in our ongoing efforts to restore investors' faith and confidence in the fairness and integrity of our markets."

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The Restrictions

In an attempt to promote the settlement regulators trumpeted the restrictions placed on the companies. Business would never be the same they claimed. In essence these restrictions are artificial and tedious requiring people who work together not to talk to each other.

The structures separating analysts and their remuneration from bankers are contrived and their common interest in making money for the company which employs them remain.

The changes rely heavily on compliance officers and attempt to make them play a larger part in the firm. As we have seen with analysts it is economic benefit which defines status in the hierarchy. Compliance officers have limited direct economic benefit.

While these changes, which require self monitoring may have a short term impact the likelihood that they will stand up to prolonged and intense competitive pressures is questionable. With time, and regulatory tedium we can expect employees to find ways around them, or to simply ignore them. The restrictions address the problem of analysts' reports but not the wider problem of corporate fraud. How for example do you stop large banks from using their market power to buy the research they want.

Instead of discussing the paucity of punishment of people, the regulators wanted to talk about the changes they are forcing on the firms and their hopes that progress toward a settlement would help to bring individual investors back into the financial markets. The firms, including Merrill Lynch, Morgan Stanley and Goldman Sachs, have agreed to limit interaction between their analysts and their bankers and to buy stock research from independent companies and distribute it to investors. Wall St. Deal Says Little About Individuals The New York Times December 21, 2002

In addition to the settlement, new regulations to be announced today will forever change how business is done on Wall Street, although many firms have already instituted some of the new rules. Within firms, for example, investment bankers and analysts must be physically separated from one another and bankers will no longer be allowed to have any influence over how research analysts are compensated. Analysts to Pay Millions in Fines New York Times April 28, 2003

As part of sweeping overhaul of the rules:
  • Wall Street firms must separate research and banking operations.
  • Analysts' compensation must be unrelated to investment banking business.
  • Analysts are barred from soliciting investment banking business.
  • Firms must put a warning on all research reports indicating whether firms do investment banking business with the companies they cover.
  • Brokerage firms agree not to divert shares in lucrative initial public offerings (IPOs) to clients in a position to give them investment banking business.
  • Firms must disclose quarterly the price targets, ratings, and earnings per share forecast in its research reports.
  • The firms agree to purchase independent, third-party research for their customers over the next five years.

'Biased' Wall St firms fined $2.26bn Australian Financial Review April 29, 2003

Moving decisively to prevent bias in future research reports, the regulatory settlement announced yesterday bars Sanford I. Weill, chairman of Citigroup, and other senior officers from talking to Citigroup's research analysts on investment banking matters without a company lawyer present. Citigroup's Chairman Is Barred From Direct Talks With Analysts The New York Times April 29, 2003

Brokerage firms must also provide clients with competing independent research and end the infamous practice, called "spinning," of allotting hot initial public offering shares to favored clients. Firms are already adopting many of these reforms to regain investors' trust. Even experienced investors were shocked to discover how widespread these practices were. The settlement should be closely monitored to prevent their reappearance. Finding Fraud on Wall Street The New York Times April 29, 2003


  • Analysts' pay will be based on research quality and accuracy. Firms must post data on analysts' performance on their Web sites each quarter.
  • Securities firms must disclose whether they do business with companies they are analyzing.
  • Citigroup agrees to limits on contact between senior executives and analysts.

WALL STREET SETTLEMENT: MARKET PLACE; In Wall Street Hierarchy, Short Shrift To Little Guy The New York Times April 29

"What they have imposed is a solution where they will try to regulate behavior, ethics and business practices," said Scott Cleland, the chief executive of Precursor Group and a member of a coalition of small research firms without ties to investment banks that have been seeking broader changes. "What they didn't do is address the conflict at its source -- the commingling of trading, research and banking commissions.

"The analogy is that if this were an operating room, they disinfected everything but the scalpel," Mr. Cleland said. "The scalpel is left dirty." WALL STREET SETTLEMENT: THE OVERVIEW; 10 WALL ST. FIRMS REACH SETTLEMENT IN ANALYST INQUIRY The New York Times April 29, 2003

The proposed rule, to be issued by NASD, the nation's largest securities regulator, is intended to force brokerage executives to make compliance with securities laws and regulations as important a business consideration as increasing market share.
"There was clearly a breakdown in compliance at a number of firms, and this is a way to refocus the attention of senior management on compliance issues," said Mary L. Schapiro, president of NASD's regulatory unit. "Signing on the dotted line and all the process that is necessary to do that -- conversations with their compliance officer, an in-depth review of what's happening in the compliance office -- really focuses the attention on something that is really important to the success of a firm."

If the rule goes into effect, the chief executive and chief compliance officer of a brokerage house would have to certify each year that the firm had adequate compliance and supervisory policies in place. In that way, the rule is similar to the requirement in the Sarbanes-Oxley Act that chief executives of public companies certify each quarter that financial statements are accurate.
The proposed rule would also bring into the spotlight officials who have typically operated behind the scenes at brokerage firms. Compliance matters at many firms are typically handled by their legal counsels.
THE MARKETS: Market Place; Accountability Is Focus of Rule Aimed at Chiefs Of Wall Street The New York Times June 4, 2003

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Criticism of the Settlement

The initial reports were guarded but some more penetrating analyses followed. One article drew a telling comparison between analyst fraud and internet fraud. The article compared the settlement with fining fraudulent internet sellers 7% of their annual income and then requiring them to voluntarily monitor and certify that their research was sound.

There are criticisms about the failures to address individual responsibility and character, and/or change management.

Shortly after the final settlement senate committees interviewed and attacked the regulators for their failure to adequately penalise the banks. They did not do anything about the flawed laws.

There is a pervasive conflict, he said, that comes from focusing on the needs of institutional clients while treating brokerage customers as "the end point in a distribution chain of investment products."

Mr. Pottruck (David Pottruck, co-chief executive of Charles Schwab) said, "Individual investors ought to have certain rights and a system that serves their interests, that's invented around them, that protects them, where they're at the center." Investor Discontent The New York Times April 12, 2002

"To an extent, it's always individuals who are responsible for wrongdoing," Mr. Bromberg (professor of securities law at Southern Methodist University) said. "This sort of settlement smooths that over so there's only corporate or institutional responsibility, not individual responsibility." CORPORATE CONDUCT: THE OVERVIEW; WALL STREET FIRMS ARE READY TO PAY $1 BILLION IN FINES The New York Times December 20, 2002

Article by Lucian Bebchuk; Lucian Bebchuk is a professor at Harvard Law School and a research associate of the National Bureau of Economic Research.
One week ago regulators and the nation's top investment firms announced what they described as a historic settlement. To settle government claims that they misled investors, the country's 10 largest securities firms will pay $1.4 billion and will make certain changes in how they operate. Industry regulators said the settlement represents "the dawn of a new day on Wall Street" and is a "vital step in restoring investor confidence."

It might be more accurate to regard the settlement, announced by federal, state and industry regulators, as a slap on the wrist. By any standard measure -- its punitive value, its deterrence effect or the extent to which it will bring about structural change on Wall Street -- the settlement is rather modest.
While more than $1.4 billion in fines and future payments is hardly trivial, it is not large given what is at stake and the potential gains to the firms from this type of misconduct.
The total cost of the settlement to Citigroup will be $400 million. Is this price steep enough to discourage thoughts of similar misdeeds in the future? Hardly.
Citigroup's investment banking unit, the unit has underwritten $190 billion in the telecom sector alone since 1996, pocketing hundreds of millions in underwriting fees. Moreover, according to its 2001 annual report Citigroup made $4 billion from underwriting fees in 2000 and 2001 -- 10 times the cost of its part of the settlement.
Perhaps the value of the settlement lies in neither its punitive effect nor its deterrence value but in the structural changes it will bring to Wall Street.
The settlement does not permit the fate of analysts to be directly determined by the investment banking unit. But the success and compensation of analysts will continue to depend on the management and decisions of the firm's top executives, for whom investment banking fees remain an important source of profits.

There is strong empirical evidence that analysts tend to issue more favorable reports about companies with which their firms have an underwriting relationship. There is little reason to expect that the settlement will eliminate this pattern.
And perhaps there are no realistic structural reforms that would work better than the moderate ones adopted.

Still, the settlement is better characterized as "business as usual" than as "the dawn of a new day." We should not exaggerate the extent to which the settlement will restore investor confidence. Settling for Less The New York Times December 27, 2002

But because greed is a part of human nature and human nature seldom seems to change, Alan Bromberg, professor of securities law at Southern Methodist University, remains skeptical that the terms of the settlement will bring substantive change to Wall Street.

"I don't see this as a great reformation," Mr. Bromberg said. "I don't see this as a new world we are moving into. The pressures are still going to be there. Brokerage firms don't make money other than by selling securities, so they're going to inevitably be encouraging people to buy and will always have pressures to hype what they think is good or what they're otherwise involved in." WALL STREET SETTLEMENT: MARKET PLACE; In Wall Street Hierarchy, Short Shrift To Little Guy The New York Times April 29, 2003

For all the anticipation of today's announcement, the voluminous record of complaints and damaging evidence left many unresolved questions for both investors and the securities industry.

Foremost among those was what long-term impact the settlement will have on the culture of Wall Street, the integrity of stock analysis WALL STREET SETTLEMENT: THE OVERVIEW; 10 WALL ST. FIRMS REACH SETTLEMENT IN ANALYST INQUIRY The New York Times April 29, 2003

BYLINE: By Richard Dooling; Richard Dooling's most recent novel, "Bet Your Life," is about insurance fraud.
They won't talk to each other. Really.

Right. Imagine the same remedies being imposed on the other purveyors of fraud in the news last week: outfits that use the Internet to sell things like penis enlargers.
What if, instead of threatening to send them to jail, the authorities said: "O.K., hand over 7 percent of last year's profits on that herbal Viagra. Then follow up with some structural reforms. Make sure the people testing this stuff don't talk to the people selling it." How would they react? How would we?

What is the real difference between Henry Blodget, Merrill Lynch's Internet analyst during the tech boom, and the guy who tries to entice me into the latest e-mail scam?
The central engine of fraud never changes: tell lies to gullible people until they hand over their money.
Investors like to believe not only that they're smart, but that financial scandals are isolated blights confined to a single firm or sector. Alas, the trove of evidence produced during this latest inquiry points to systemic conflicts of interest in investment trading, research and banking. The odor coming off these papers suggests a system that is rotten to the core.
Restore investor confidence in Wall Street? Not likely for baby boomers, who've already been publicly fleeced in broad daylight. Wall Street will have to wait for another generation of innocents to prey upon.
A Fraud by Any Other Name The New York Times May 4, 2003

Senior United States senators questioned today whether the $1.4 billion Wall Street settlement would change attitudes at the top of the biggest brokerage firms, while regulators defended the agreement as a historic move toward reform.

"Firms are not contrite and simply consider the fines and penalties as a means to make a problem go away," said Richard C. Shelby, Republican of Alabama, at a Senate Banking Committee hearing on the settlement that was made final last week with 10 firms.

"I am not convinced that the global settlement has done enough to change attitudes at the top of these banks," said Mr. Shelby, chairman of the committee. Senators Question Effectiveness of $1.4 Billion Settlement The New York Times May 8, 2003

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De ja vu

Going through another round of regulatory change to patch the many holes that allowed the roaring tide of rising marketisation to sweep through will not prevent it breaking through somewhere else.

It happened in the 1880s, again in 1929 and even more famously in 1987. After every stock market party, the police arrive to pick through the morning-after rubbish and find something ugly. The great Mom and Pop rip-off: The Guardian (London) June 1, 2001

The response by all responsible parties to the repeated scandals over the years has been token fines, and then to patch the hole which caused the immediate problem, before putting it behind them and pretending it really did not happen or that we are different now. The response this time is no different and once again the senior managers of the companies with whom the buck should stop go unscathed.

Alan Bromberg, professor of securities law at Southern Methodist University, said - - - - "I think it's poor business practice not to have an even playing field," he said. "But I don't see any way to effectively legislate an even playing field and that is the problem." Ebbers Got Million Shares In Hot Deals The New York Times August 28, 2002

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Promising More Prosecutions

Challenged by critics and heavily criiticised in the senate regulators changed their tune and promised that this settlement was only the first step in their efforts to weed out and punish those responsible. Donaldson promised "This is just the beginning." Spitzer said that executives were "fair game" for regulators and in July it was announced that the head of Citigroup's research department might be charged.

Nearly 8 months since the settlement those who have not lapsed into an amnesic torpor are still waiting for any further sign of regulatory activity. President Bush has supplied a convenient distracter in Iraq.

Spitzer may have been willing. In fact a new round of subpoenas looking for emails was sent to 12 of the Wall Street institutions.

Ex-financier Donaldson and those at NASD would have been reluctant about going after prominent colleagues and friends like Weill and Carpenter from Citigroup. The stock exchange would have strongly opposed this. They would insist on "putting it behind them" in the overall interest of the market.

So far, regulatory proceedings against analysts have not led to actions against their superiors, the executives who ran Wall Street research departments. But such cases may be forthcoming, according to some regulators. Mr. Blodget and Mr. Grubman were not rogues; their actions were subject to scrutiny by their superiors who had a duty to ensure that they were abiding by securities laws. Wall Street Star May Face Suit By Regulators The New York Times January 4, 2003

"This is very much the beginning," said the New York attorney general, Eliot Spitzer, whose early inquiry into conflicts on Wall Street prompted federal and market regulators to begin focusing on the issue -- and who supporters say might try to ride his success in the case to the governor's office in Albany. "One of our objectives was to put information into the marketplace to permit investors on their own to seek relief."
Government officials also emphasized today that the settlements did not preclude them from further investigation --
"Just wait," said Stephen M. Cutler, the head of enforcement at the commission and a leading architect of the agreement.

Mr. Shelby compared huge investor losses with the relatively modest payout and asked William H. Donaldson, - - - - whether the settlement punished Wall Street enough.

Mr. Donaldson, - - - -, pledged further inquiries of brokerage executives. He said, "You cannot dismiss the fact that these are the largest fines that have ever been given.

"This is not the end," he said. "This is just the beginning."
But no other individuals have been singled out despite thousands of memos and e-mail messages released by investigators showing managers deeply involved in an intertwining of research and investment banking that compromised analysts' work.
Senators Question Effectiveness of $1.4 Billion Settlement The New York Times May 8, 2003

Federal securities regulators have demanded copies of e-mail messages and other documents from 12 large Wall Street firms and dozens of their managers, including current and former chief executives, as they open a new phase of their investigation into stock research.
The demands come as regulators turn their attention to the executives who were responsible for supervising the analysts who rated the stocks. Having built cases against some firms by compiling embarrassing e-mail messages written by analysts, the regulators now want to see what those who were in charge of the research and investment banking departments, and even the entire companies, have to say about investment recommendations.
Mr. Weill was among the Citigroup executives named in the subpoena sent to that company, people who have been briefed on the matter said yesterday.
S.E.C. Seeks Information On Analysts' Supervision The New York Times June 3, 2003

The area of supervisory failures is a subject of considerable concern among regulators - - - - - -- none of the executives who oversaw the analysts' work have been pursued.

It is highly unusual for top executives of brokerage firms to be the subject of regulatory actions. THE MARKETS: Market Place; Accountability Is Focus of Rule Aimed at Chiefs Of Wall Street The New York Times June 4, 2003

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Implications for Investors

The major penalty for these financial conglomerates may prove to be retribution by shareholders. This is however not a forgone conclusion. While the morality and even criminality of what was done is not in doubt, the legality is far from clear. It remains to be seen how the judiciary responds if these cases come to court which seems unlikely.

The financiers will want to stay out of court because of the publicity. The quantum of damages will depend on their eagerness to keep it out of court as well as legal opinion about the likelihood of success. Estimates of banker's possible payouts in settlement of the fraud range up to US $30 billion. A figure of US $10 billion is suggested for Citigroup alone. No one asks how much of this will be claimable from insurance. Citigroup has set aside US $1.3 billion to meet these costs but litigation is likely to drag on for years. One of the reasons given for the early out of court settlement of regulators actions was so that litigants would be able to secure compensation in their life times.

Some analysts have predicted it could cost Citigroup $10 billion to settle lawsuits arising from its work for Enron, WorldCom and several other troubled telecommunications companies. Salomon Talks To the S.E.C. About Settling Conflict Cases The New York Times September 28, 2002

Citigroup set up a $1.3 billion legal reserve last quarter and Credit Suisse First Boston, a unit of Credit Suisse, said on Tuesday that it had set aside $450 million to cover the costs of litigation over its stock research practices. Merrill Shows Profit, But Gloom Prevails The New York Times January 23, 2003

The claims go beyond previous disclosures of the frenzied atmosphere at Global Crossing before its financial collapse early last year, and they set the stage for a legal battle expected to take years. The suit also names as defendants several investment banks -- including Salomon Smith Barney, part of Citigroup -- that raised money for Global Crossing and recommended its securities to their clients. Adding to Claims Against Global Crossing The New York Times January 30, 2003

"The arbitration cases between the banks and small investors will be a war of attrition over the next five years," said Jacob H. Zamansky, an arbitration lawyer based in New York who gained notice by winning a $400,000 claim against Merrill Lynch in 2001. He said that he was getting up to 20 e-mail messages a day from individual investors eager to press suit now that new evidence on analyst conflicts will be made available. Analysts to Pay Millions in Fines New York Times April 28, 2003

This unambiguous language (ie fraudulent), not the fines' dollar amounts, may be the most significant outcome of the inquiry undertaken by the New York attorney general, Eliot Spitzer, and other regulators. Finding Fraud on Wall Street The New York Times April 29, 2003

Federal and state officials said today that one aim of the settlement was to shake out enough strong evidence to assist shareholders in private lawsuits and arbitration efforts. WALL STREET SETTLEMENT: THE OVERVIEW; 10 WALL ST. FIRMS REACH SETTLEMENT IN ANALYST INQUIRY The New York Times April 29, 2003

Analysts estimate that arbitration and other civil litigation cases will eventually cost the big investment banks billions of dollars.
Still, by agreeing to settle with regulators this April, the banks with a big network of individual customers, like Merrill and Citigroup, have tacitly agreed to the claims made by regulators that some of the research they issued during the boom was fraudulent, even though they neither admitted to nor denied such accusations.
Legal Reprieve For Wall Street Is Not Likely To Last Long The New York Times July 4, 2003

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Corporate Responses

Corporate Response to The Enron Scandal

As we have seen elsewhere the initial response to the allegations about the complicity of the banks in the Enron fraud was indignation. The structured finance practices were well established and had been carefully checked for legality. It was not their legality but their amorality which was so disturbing. These allegations were resolved separately and I have addressed that on another page. Only one quote is included here.

Sanford I. Weill, the chairman and chief executive of Citigroup, told employees yesterday - - - - - in a letter that Citigroup's work for Enron was legal and complied with accounting standards and industry practices on Wall Street.
Mr. Weill has not gone as far as senior executives of a rival, J. P. Morgan Chase, who told investors and reporters on Wednesday that their employees had done nothing wrong in helping Enron set up complicated financing vehicles that kept large amounts of debt off the company's balance sheet.
"I feel badly and I truly regret the pain that has been caused," he (Weill) said in the letter. "From everything we know, our activities with Enron were legal, met accounting standards, and reflected industry practices -- and our people, relying on the advice of independent legal and accounting experts, believed they were doing the right thing."

Still, Citigroup may conduct itself differently in the future because, Mr. Weill said, "the industry's standards are changing rapidly."

"By today's new standards," he added, "and with the benefit of hindsight, we will evaluate client transactions in an entirely different light than in the past." Citigroup's Chief Defends Enron Work To Employees The New York Times July 26, 2002

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World Business Responds to Enron

The wider business community also preferred not to confront the issue of Enron. At international business meetings like the World Economic Forum of which Enron was a prominent member, the matter was largely kept off the program and hardly discussed in private. Even more worrying was the way in which the issue was played down and the myopic level of denial about its significance.

More than a thousand corporate chief executives are gathered in New York for the World Economic Forum, their voices ringing out in almost all the panel discussions.

But in four days of nonstop talking, the Enron scandal has hardly been mentioned; when it has been, the emphasis has been on lax business practices and how every recession brings down some big company, rather than on the apparent fraud at the heart of Enron's collapse.

Only one hastily organized panel specifically dealt with the scandal, and its principal speaker, Richard H. Murray, director of legal and regulatory affairs at Deloitte & Touche, quickly set the tone. Enron, he told a less-than-packed audience in one of the smallest conference rooms, should not be viewed as a morality play -- there are too many nuanced issues and no clear answers.

Gail D. Fosler, chief economist at the Conference Board, argued that "Enron happened as part of the change in corporate value systems between 1989 and today."
"Enron is not important to us," Mr. McLean (the forum's chief spokesman) said. "They are bankrupt."
Many cited Enron as a symptom of the times, a point of view offered by Stanley Fischer, the former second in command at the International Monetary Fund who is now a vice chairman at Citigroup. "Enron is something that happens at the end of a boom," he said in a panel on the economic outlook, "so I think we are in for a period of slow growth."
And in interviews, half a dozen chief executives, made less rather than more of the scandal.
"But I don't think they are drawing the conclusion that because Enron failed, the system is flawed."
"Someone raised the issue of corporate corruption," Mr. Sweeney said, "and the consensus on the panel was that this was not an issue of globalization."
ENRON'S MANY STRANDS: THE BUZZ; World Economic Forum Plays Down the Scandal The New York Times February 4, 2002

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Share Spinning

Share spinning was something which had gone on for years but had never been used to secure influence and support quite so blatantly. Although it was included in the settlement agreement companies did little more than promise to behave better next time. It was not stopped.

Fraudulent Market Reports

The fraud involving analysts was a rather different issue. The analysts' professional values, and the corporations' responsibilities were clear. The failure was one of deliberately looking the other way. They simply did not want to know. People like Grubman, and probably Weill rationalised their behaviour. Others adopted strategies to ensure that they did not look, and that those who did were ignored. Private emails show that many were unhappy but wisely did not complain openly. Those who did soon found themselves expendable.

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Denial and Attacking the Messenger

The first response to the allegations was one of denial, claiming that this did not happen and that analyst and corporate ethics were above reproach. Market supporters turned on Spitzer, the messenger and attacked him alleging ulterior motives.

Yesterday, as Merrill was being granted another week to make court-ordered changes to its stock reports, the industry's main trade group was arguing against proposed reforms.

Stuart Kaswell, general counsel of the Securities Industry Association, said the group was preparing to weigh in against a proposed requirement from securities regulators that analysts disclose details of any banking relationships their employers had with the companies they were rating. He said the requirement would be too costly and would not help investors evaluate the research.
Despite what Mr. Spitzer called "dramatic evidence" to the contrary, Mr. Kaswell insisted that most analysts were unbiased and that securities firms knew better than to risk compromising the integrity of research to make more money.

Their research is "the crown jewel of the brands of those firms," Mr. Kaswell said. "It's just not credible to think that senior management would tolerate an institutional pressuring of one of their major franchises to get the next transaction."

Mr. Kaswell said many people, including analysts, became too exuberant about stocks in the late 90's. "That doesn't mean they were corrupt," he said. "It means they were wrong. Being wrong isn't criminal." Investor Discontent The New York Times April 12, 2002

Reeling from a contracting economy and a loss of faith in the stock markets, many of the people who work on and around Wall Street see Mr. Spitzer at the root of their troubles.

Many say his investigations into Wall Street practices continue to harm an industry that is already down and out, and accuse him of pursuing the issue for his own political gains. And they are angry.

Some said their feelings were evident this week, for example, when Mayor Michael R. Bloomberg, Gov. George E. Pataki and Rudolph W. Giuliani, the former mayor, were among the political notables invited to the gala 70th birthday party for Sanford I. Weill, the chairman of Citigroup -- and Mr. Spitzer was not.
"Look I've seen this movie before," said Michael Holland, a former Salomon Brothers partner and a fund manager at Holland & Company. "Spitzer has obviously overreached. - - - - - - -- he saw his opportunity and he took advantage of it."
In the Wall Street community, the animosity toward Mr. Spitzer is hardly a secret. He made a name for himself by taking out of mothballs the Martin Act, a 1921 state law giving the attorney general jurisdiction over securities trading. With that, he took on Merrill Lynch & Company, the nation's biggest brokerage firm and a pillar of New York's financial community.
Spitzer Unpopular on Street He Made His Beat The New York Times March 20, 2003

The unfolding evidence was quite clear and there was soon much less room for public denial. Some preferred to remain silent and keep their heads in the sand.

That those involved in the settlement did not see it as altering the way business was going to be done in the future is reflected in the large salary UBS Warburg paid to a new Health Care analysts during the negotiations.

But even if she is not giving all favorable reviews to companies under her purview, her rich contract has caused a number of bankers to suggest that the only way UBS Warburg could justify paying her over $3 million a year is if she brings in a substantial amount of investment banking business. Conflict Issue Over Analyst's Deal New York Times April 8, 2003

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Mea Culpas

In other companies, senior staff like Weill were more directly involved and threatened. Their interests were better served by doing a mea culpa and promising changes. They rushed to show willingness by putting the recommendations made by the regulators into place before they were finally forced to do so.

This is what Citigroup did and one wonders if this enabled Weill to escape prosecution. In spite of his mea culpa Weill still skirted around Citigroup's culpability by talking of the "appearance of what we do". He subsequently replaced senior staff and then resigned himself. None of this stopped each of the companies from negotiating aggressively to minimise restrictions on their business activities and reduce their liability to further civil actions for damages.

Most Wall Street firms and their executives, embarrassed by details in the industrywide settlement on how they duped investors to keep their corporate clients happy, have either kept quiet or issued statements of contrition for the lapses that occurred during the stock boom of the 1990's. THE MARKETS: Market Place; Grabbing for a Patch of Moral High Ground The New York Times April 30, 2003

While Wall Street firms brace for more embarrassing details to come out, they are already scrambling to put into force the stricter new regulations, which will abruptly change the way investment bankers and research analysts interact.

Research officials at Wall Street firms say they are already changing their pitch books ÷ the formal presentations that bankers show to companies when they are bidding for a deal or a public offering. While in the past these books would prominently mention the firm's analyst, that will no longer be the case.
For bankers and analysts used to spending weeks together on the road pitching new deals, it will be a new and somewhat colder world.
Analysts to Pay Millions in Fines New York Times April 28, 2003

In a statement released yesterday, Mr. Weill apologized for past business practices and announced that Sallie Krawcheck, the chief executive of Smith Barney, which is now Citigroup's research and brokerage arm, would meet privately with the Citigroup board's compensation, audit and governance committees to review compensation and budget issues for her research division.

"Certain of our activities did not reflect the way we believe business should be done," Mr. Weill said. "That should never have been the case, and I am sorry for that. I have been reminded myself of how the appearance of what we do may be questioned and of how we must take care to ensure that our conduct does not raise such questions." Citigroup's Chairman Is Barred From Direct Talks With Analysts The New York Times April 29, 2003

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Blaming the Investors

The response after the settlement was predictable. Those senior staff who had kept their heads in the sand attempted to deny their culpability, something they had undertaken not to do. This brought a sharp reprimand from regulators. Some companies took the "we were not as bad as the others" approach claiming their infringements were minor. Others wisely remained silent. Citigroup did make changes.

Instead of coming to terms with their unsavoury conduct the blame was shifted to the poor defrauded investors who should have known that investing on the stock market carried risk. They should not expect compensation when their gamble did not come off. Spitzers actions threatened the very nature of capitalism.

Then there is Philip J. Purcell, the chief executive of Morgan Stanley. According to Mr. Purcell, Morgan Stanley and its clients should not be disturbed by the firm's activities during the bubble.
His remarks to a packed ballroom at the Pierre Hotel lasted about 15 minutes. Taking questions, Mr. Purcell appeared to contradict directly the regulators' findings that Morgan Stanley had failed to disclose to investors that it had paid $2.7 million to other Wall Street firms to publish research on companies whose shares Morgan Stanley had underwritten.
Mr. Purcell's comments came as a surprise to Eliot Spitzer, the New York attorney general, whose office investigated Morgan Stanley. "We believe," he said, "that the allegations set forth in the Morgan Stanley document establish a record that should deeply trouble retail investors - - - - .
"If a firm engages in denying the settlement terms, it's risky business," said Christine Bruenn, president of the North American Securities Administrators Association and one of the regulators that investigated the Wall Street firms. "A firm who does deny the settlement terms once they have settled risks the ire of the 50 states, the two self-regulatory organizations and a contempt order from a federal judge."
THE MARKETS: Market Place; Grabbing for a Patch of Moral High Ground The New York Times April 30, 2003

William H. Donaldson, the commission (SEC) chairman, said in a letter dated Wednesday that he was "deeply troubled" by comments from Philip J. Purcell, the Morgan Stanley official, which he said "evidence a troubling lack of contrition."

He warned that Morgan Stanley could face further legal action if it continued to deny having acted badly in the research scandal, which was the subject of a $1.4 billion industry settlement.
Before and after the settlement's details were announced, Morgan Stanley sought to establish a public perception that it had behaved better than other major investment banking firms, even though it was required to pay $125 million in the settlement. At the conference on Tuesday, Mr. Purcell argued that Morgan shares were a good investment because "we have maintained our standards, in market share as well as our reputation, in my view."
But Mr. Purcell's statement, coming a day after his firm accepted the settlement without admitting or denying the allegations, "was deeply troubling." He added that the commission chairman's letter "is an interesting example of backbone on the part of Donaldson."
"First, your statements reflect a disturbing and misguided perspective on Morgan Stanley's alleged misconduct," Mr. Donaldson wrote. "The allegations in the commission's complaint against Morgan Stanley are extremely serious".
"In light of these charges," Mr. Donaldson continued, "your reported comments evidence a troubling lack of contrition and lead me to wonder about Morgan Stanley's commitment" to complying with the law.

Mr. Donaldson noted that the settlement required Morgan Stanley not to deny the allegations, and added that that requirement applied to Mr. Purcell. MORGAN STANLEY DRAWS S.E.C.'S IRE The New York Times May 2, 2003

Having won the war -- or at least a major battle -- against Wall Street's shoddy behavior, Mr. Spitzer, New York's attorney general, already fears losing the peace.

One big reason is a cynical revisionism taking hold in some Wall Street quarters. The thesis is that investors have only themselves to blame for their losses during the stock market, not duplicitous research. The thesis further holds that little will change as a result of the settlement's reforms.

Instead of just taking a bow on Monday, as he deserved to do, Mr. Spitzer counterattacked, singling out for special scorn an op-ed piece written the previous week for The Wall Street Journal by Stanley O'Neal, the chief executive of Merrill Lynch, one of three firms that were charged with fraud. Mr. O'Neal argued that regulatory attempts to remove risk from the marketplace threatened the very nature of capitalism.
Mr. O'Neal wrote that it was a disservice to the economy and to investors to teach them that "if they lose money in the market they're automatically entitled to be compensated." But, of course, that is not the lesson Mr. Spitzer and the other regulators are trying to teach. Their mission is to end conflicts of interest.

Mr. O'Neal's essay is only one of several signs that Wall Street remains in deep denial about the degree to which it betrayed investors' trust. On Tuesday, Philip Purcell, chief executive of Morgan Stanley, insisted there was nothing improper about revelations that his firm and others had paid one another to issue bullish research reports on their investment-banking clients.

No less cavalier was the New York Stock Exchange's recent nomination of Sanford Weill, Citigroup's chairman, to join its board. - - - - -- but one is still left wondering where Richard Grasso, head of the exchange, has been in the past year.

Investors should keep a wary eye on this self-denial and lack of contrition. It may suggest that the revisionists are on to something when they say that nothing will change on Wall Street. Wall Street Revisionism The New York Times May 1, 2003

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Spitzer won the Battle but lost the War

The next step was to portray those who had imposed the restrictions in a negative light and claim that they were a threat to marketplace democracy, which was seen as a higher goal.

As far as the stock exchange and the companies went they wanted as little interference with business activities as possible. They wanted to get back to business. The words used were to "put this behind us" which really meant to get it out of sight so that everyone would forget about it. Some reports considered that Spitzer had won the battle but lost the war.

A Citigroup statement said, "We are pleased that today's announcement of a settlement-in-principle will put these regulatory matters behind us." Wall St. Deal Says Little About Individuals The New York Times December 21, 2002

Just as efforts to close tax loopholes spur financial wizards to devise strategies to test the law's limits, so the experts in structured finance are driven to devise new strategies to find legal ways to buff, if not distort, the performance of underachieving corporations.

"They are just redefining the equation," Michael H. Sutton, a former chief accountant with the Securities and Exchange Commission, said of recent reform efforts. "That's not going to stop the pressure to structure transactions that meet the requirements of the new rules." A Higher Standard for Corporate Advice The New York Times December 23, 2002

"Firms are not contrite and simply consider the fines and penalties as a means to make a problem go away," said Richard C. Shelby, Republican of Alabama, at a Senate Banking Committee hearing on the settlement that was made final last week with 10 firms. Senators Question Effectiveness of $1.4 Billion Settlement The New York Times May 8, 2003
There is, alas, only one Eliot Spitzer. And while you want to stand up and cheer when Mr. Spitzer, New York's attorney general, wins another round against malefactors of great wealth, his side -- our side, unless you happen to be a corporate insider -- is losing the war.
This (US $1.4 billion) was, however, a mere slap on the wrist. And it's increasingly obvious that neither the investment bankers nor corporate evildoers in general are feeling chastened.

Indeed, last week Stanley O'Neal, the chief executive of Merrill Lynch, wrote an op-ed article caricaturing the likes of Mr. Spitzer -- though without naming him -- as enemies of capitalism who teach investors that "if they lose money in the market they're automatically entitled to be compensated."
But it's revealing that Mr. O'Neal felt empowered to write that piece in the first place. Like the New York Stock Exchange, which tried to appoint Citigroup's Sanford Weill to its board -- Mr. Weill is now forbidden to talk to his own company's analysts unless a lawyer is present -- Mr. O'Neal overreached. But he clearly knows which way the wind is blowing.
Last summer it seemed, briefly, as if the torrent of scandals -- and the revelations about how closely some of our politicians were tied to scandal-ridden companies -- would bring about a public backlash against corporate malfeasance. But then the topic largely vanished from the news, driven out by reports about Iraq's nuclear weapons program and all that. And after the midterm elections, which put apologists for corporate insiders back in control of all the relevant Congressional committees, we might as well have had the sirens sound the all-clear. Only Mr. Spitzer still has both the inclination and the power to make trouble.
In the end the corruption of our corporate system will bring retribution; - - - - - . But right now the bad guys, though they lose an occasional battle, are winning the war.
The Acid Test The New York Times May 2, 2003

The reason that Spitzer lost the war was that while he was fighting and winning some victories in the battles in the courts the financiers were quietly winning their own important battles and these were hidden from view.

But Mr. Lewis of the Center for Public Integrity said: "Millions of Americans have lost their nest eggs or seen their retirement savings diminished, and we're getting political rhetoric from Washington that it's a few bad apples. The idea that after all this Washington did a collective yawn is nothing short of offensive. The only people they seem to be talking to are the people who funnel the money to their campaigns or who don't want to be regulated."

Few groups funnel more money to Washington than the financial services industry. From July 2001 to July 2002, the most recent period for which figures are available, 10 large brokerage firms and two securities industry lobbying organizations spent $31 million pleading their cases before Congress, the White House and many Washington agencies.
J. P. Morgan Chase spent $6.4 million on lobbying during the period, and Citigroup and its brokerage unit, Salomon Smith Barney, spent $6 million. Corporate governance issues like executive compensation, stock options and auditor independence were on Citigroup's agenda, according to its filings.
Pipeline to a Point Man The New York Times November 3, 2002

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Failures in Comprehension

In the midst of the exposure of its practices and an outcry about Blodget's dishonest reports Merrill Lynch brought Blodget's retired boss out of retirement to run the company's flagging research department.

Since the firm plucked Andrew J. Melnick out of retirement early last year to help run its research department, Goldman Sachs's rankings in research polls have declined.
Regulators are now examining whether Mr. Melnick -- who ran Merrill's research department from 1997 through 2001 -- and other top Wall Street executives failed to supervise their analysts. They have issued subpoenas to Merrill, Goldman and other firms, seeking e-mail messages and documents from 1999 through 2001. The deadline for filing these documents was yesterday.

During the period in question, Mr. Melnick hired, supervised and helped to determine the compensation of Mr. Blodget and Phua K. Young, who was accused by NASD, the securities industry regulator, last month of issuing misleading research reports on Tyco International and exchanging gifts with L. Dennis Kozlowski, the company's chief executive at the time.
"What were they thinking?" asked Michael Holland, an investment manager and a former Salomon Brothers partner. "At the most optimistic, one can describe the hiring of Mr. Melnick as a pretty aggressive move given the highly charged political atmosphere that existed both then and now."
Mr. Melnick did not come cheap: several people with an understanding of his compensation package say that Goldman agreed to pay Mr. Melnick more than $5 million a year.
Leader of Goldman's Stock Research Has Rough First Year The New York Times June 21, 2003

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Citigroup Makes Changes

Weill was given a nasty shock. Citigroup had the most stringent conditions applied and in fairness to Weill he responded. Very early on he accepted that Citigroup's conduct had been unacceptable and while he did not admit liability he promised to change. He probably had little choice. Salomon Smith Barney's tarnished name was changed to Citigroup Global Markets. Its interesting that he started recording stock options differently in accounts. Weill and Reed had earlier been on a business round table committee which scuppered government plans for reforming options in this way.

Weill fired seniors staff and many analysts and then retired himself. The problem is that he appointed his own supporters to replace him people from the firm whom he had groomed. They were likely to continue the same stressful management practices which fueled the fraud.

Under the agreements firms had undertaken to buy independent research. Analysts in the firm had become an expensive liability rather than an asset and a downgrade was inevitable. The culling of analysts should be seen as a business decision as much as a response to the regulations. Their private emails were a threat to the company. Teams were employed to screen all personal email and transgressions were an excuse for firing more staff.

Weill resigned from the other boards he was on including AT&T where his conflicts of interest had created problems as revealed in the Grubman affair. This may simply have been good public relations because Weill, nearly 70 was going to retire anyway. He knew that Spitzer had him in his sights and was doing everything he could to show he was making changes.

It is my thesis that it is the context to which people respond which is the problem rather than the people themselves. If this is true then simply changing faces and regulations will not work. If these new people don't find ways around the system in order to be meet competitive objectives then they will be replaced by someone who will.

It is interesting that Mr Weill's successor, CHARLES O. PRINCE III is also an expert acquirer, a lawyer whose life's work has been arranging Weill's deals and putting out the fires resulting from his focus on outcomes and neglect of what was happening in the company. It will be interesting to see whether he can run a company which does not do these unsavoury things but still remains competitive over the long term. My assessment of this marketplace is that like health care where there are similar conflicts it simply can't be done. He will be pushed when profits fall.

In health care we are familiar with protestations and commitments to reform. Tenet Healthcare and its management was particularly profuse in its public commitment to ethics and reform, yet 5 years later it responded to market pressures and reverted to type - even carrying out unnecessary surgery. Like Salomon Smith Barnety (now renamed Citigroup Global Markets to escape its past ) National Medical Enterprises changed its name to Tenet Healthcare and replaced senior management with like minded successors. One wonders whether Citigroup will be any different.

The chief executive of Citigroup, taking the offensive after weeks of negative publicity regarding the company's role in financing Enron and WorldCom, outlined to employees yesterday several changes in the way it does business.

In a memorandum circulated within Citigroup, Sanford I. Weill said the bank would no longer provide financing for companies that plan to conceal debts by keeping them off their balance sheets. - - - - - Mr. Weill also said that Citigroup planned to join a growing list of corporations that would begin recording stock options granted to employees as expenses. The accounting change will take effect next year.

In addition, Citigroup's board will set up a committee that will focus on corporate governance issues. All the members of the committee will be independent directors, Mr. Weill said.
"Starting immediately, we will only do these transactions for clients that agree to make prompt disclosure," Mr. Weill said.
Citigroup has previously maintained that it was not responsible for Enron's attempts to hide its debts because Enron did not tell its bankers that it planned to hide the obligations.
"Investors have made it clear that they want options accounted for in this manner, and we at Citigroup continue to place a high priority on our responsibilities to shareholders," Mr. Weill said in the memo.
Citigroup Chief Makes Changes In How BankDoes Business The New York Times August 8, 2002

"Our board's unanimous decision to create a distinct committee to address corporate governance issues reflects our wholehearted dedication to maintaining best-practice standards," said Citigroup's chief executive, Sanford I. Weill.
Citigroup Turns to a Panel The New York Times September 19, 2002

Mr. Prince said he felt up to running Salomon. "Sandy is the premier deal maker, and I was one of a handful of people who worked with him on every deal Citigroup has done," he said. "I know what doing a deal means." Mr. Fix-It for the House of Salomon The New York Times September 29, 2002

By resigning from the two boards, Mr. Weill ends a practice at Citigroup known as interlocking directorships, where corporate executives serve on each others' boards. The practice is frowned upon by specialists in corporate governance issues, because it creates the potential for conflicts of interest.
Corporate governance specialists said Mr. Weill's resignation from the boards was a positive step. "This is designed to increase his credibility with investors at a time when he needs that support," said Charles M. Elson, the director of the Center for Corporate Governance at the University of Delaware. "Regardless of the motivation, this is welcome news." 2 Outside Ties Cut by Chief Of Citigroup The New York Times October 2, 2002

Citigroup said yesterday that it had hired Sallie L. Krawcheck, the chief executive of Sanford C. Bernstein, to lead a separate division for its stock research and brokerage businesses, even before it has reached a agreement with regulators on how its analysts will operate.

The announcement is the latest in a series of appointments and other steps taken by the chief executive of Citigroup, Sanford I. Weill, over the last few weeks that demonstrate his determination to quickly resolve the multiple investigations into its investment bank, Salomon Smith Barney. Citigroup Picks A Former Star Of ResearchFor a New Unit The New York Times October 31, 2002

In a statement, Weill said, "Certain of our activities did not reflect the way we believe business should be done. That should never have been the case, and I am sorry for that." Citigroup CEO Barred From Talking To Bloomberg News ( May 5, 2003

Two of Citigroup's most senior investment bankers, Robert K. DiFazio and Arthur D. Hyde III, have been removed from their positions, the company said yesterday, hinting at what might be a fresh round of high-level management changes amid a barren deal-making environment and increased levels of regulatory scrutiny.
" - - - - this change in leadership reflects a new strategic direction for this business," Charles O. Prince (Weill's man), the head of Citigroup's investment bank, said in an internal memorandum sent to employees.
The fact that Mr. Rubin, formerly a co-chairman at Goldman Sachs, has been examining the inner workings of Citigroup's investment-banking operations suggests that Mr. Weill is serious about making changes at the equities division.

The departures of Mr. Hyde and Mr. DiFazio follow other senior executive moves that started last fall. Michael A. Carpenter, the head of corporate investment banking, was removed from his position and was succeeded by Mr. Prince, a trusted confidant of Mr. Weill. John Hoffman and Kevin J. McCaffrey, the two research officials who supervised Jack B. Grubman, the bank's former star telecommunications analyst who has been barred from the securities business for life, have also left the firm. Citigroup Ousts 2 Top Investment Bankers The New York Times May 9, 2003

Citigroup dismissed eight research analysts yesterday and temporarily withdrew coverage of 117 companies, signaling a fresh initiative by Sallie L. Krawcheck and her research team to reduce costs.

The cutbacks are the first to affect Citigroup's research operations in the United States since Ms. Krawcheck became chief executive of its Smith Barney unit last October. Other firms, including Goldman Sachs and Merrill Lynch, have made significant cuts in their research staffs this year, as weakness in trading persists and new regulations make research a more costly proposition.
Under this new regulatory regime, senior analysts with compensation packages set during the 1990's boom have become expendable, bankers and research officials say.
For Ms. Krawcheck, as for other executives on the Street, the challenge is to shrink a research bureaucracy that was largely designed to support Citigroup's investment banking and recast it to serve institutional and retail clients. Trading commissions from these sources are on the wane, though, making her charge all the more difficult.
8 Analysts Are Dismissed By Citigroup The New York Times May 24, 2003

The departing analysts assessed businesses ranging from oil to software to securities to airlines. In all, Smith Barney has at least temporarily discontinued coverage of close to 250 companies -- leaving a big gap with regard to a number of important industries.
She has also been given a mandate by Mr. Weill to create a new type of research, independent of investment banking concerns, and to banish the ghost of Jack B. Grubman, the former telecommunications analyst for Smith Barney who has been barred from the securities industry.
Smith Barney analysts have another pressing concern, though: They are afraid of losing their jobs. This fear only increased after the cutbacks in May.
Changed Smith Barney Is Thin on Analysts The New York Times June 13, 2003

But according to Smith Barney analysts familiar with the circumstances, Mr. Santangelo had sent an advance copy of a research report to a client.
The e-mail message that cost Mr. Santangelo his job was sent late one night in April, the Smith Barney analysts said, while he was alone in his office.
Smith Barney has set up a team of former analysts to monitor the department's outgoing e-mail, in addition to performing other supervisory duties.
And so it goes for research analysts in the post-bubble world. Once lionized on CNBC, celebrated on the covers of glossy magazines and in many ways considered the public face of their firms during the market boom, analysts are increasingly seen by their employers as liabilities.
Wall Street's Harsh New Reality The New York Times August 17, 2003

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