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Analyst Was Asked to Reevaluate AT&T

Citigroup CEO Sanford Weill says he urged Jack Grubman to reexamine his rating but did not request an upgrade.

November 14, 2002|From Reuters

NEW YORK — Citigroup Inc. Chief Executive Sanford Weill on Wednesday said he urged former analyst Jack Grubman to reexamine his rating on AT&T Corp. but denied that he asked for the stock to be upgraded to gain favor with AT&T.

Weill's disclosure was the first time he has admitted publicly to being involved in the day-to-day business of the firm's stock analysts, and it deepens questions about Wall Street practices already under investigation by federal and state regulators.

In a statement, Weill said he asked Grubman in 1999 to "take a fresh look" at AT&T when the analyst rated the shares "hold."

Grubman upgraded AT&T to "buy" in the fall of 1999; after the upgrade, Citigroup's Salomon Smith Barney unit was chosen as a lead manager for the new stock offering of AT&T's wireless unit, and it earned nearly $45 million in banking fees.

Weill admitted to asking Grubman to reevaluate his stance on AT&T but said the request was made "in light of the dramatic transformation of the company and the industry."

The statement came in response to a Wall Street Journal report that Grubman, in e-mails to a friend, had said that Weill pushed him to raise the rating on AT&T. Grubman said Weill wanted to secure the support of AT&T CEO Michael Armstrong -- a member of Citigroup's board -- in a power struggle between Weill and former co-CEO John Reed.

Weill, 69, said there was "absolutely no connection between" Grubman's decision to raise AT&T's rating and Armstrong's vote on Reed's future. Reed stepped down in 2000.

AT&T had no comment.

Grubman, who quit Salomon in August, on Wednesday renounced the e-mails, saying he lied in them to inflate his "professional importance."

In a statement, Grubman said: "I have said a number of inappropriate, even silly, things in a few private e-mails that have been made public over the last few months. The contents of these particular e-mails, while personally embarrassing, are completely baseless."

Investors worried about Weill's future slammed Citigroup stock: It fell $1.39 to $35 on the New York Stock Exchange.

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