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Wall Street truth and lies

May 08, 2003|Josh Friedman | Times Staff Writer

The title of tonight's edition of "Frontline," "The Wall Street Fix" (9 p.m., KCET), has a double meaning. Or does it?

Clearly, the game of stock research on Wall Street was rigged, costing millions of American investors billions of dollars. The question is whether the "corrupt business model," as New York's attorney general calls it, has been fixed with the recent $1.4-billion settlement between regulators and 10 major brokerages.

"Frontline" correspondent Hedrick Smith uses the stunning rise and fall of WorldCom Inc. as a case study in the manipulative and pervasive behavior that shattered investors' trust along with their nest eggs. This clearheaded, simply explained account will help even investing novices understand how Wall Street and corporate America went wrong -- and why many experts and investors remain skeptical about the future.

WorldCom grew from a Mississippi upstart into a bull-market darling with the help of Jack Grubman, star analyst at Salomon Smith Barney. Grubman touted the stock until WorldCom was near bankruptcy, helping Salomon parent Citigroup Inc. win favor -- and a series of juicy investment banking deals -- from the company.

Critics of Wall Street say Grubman ignored red flags because he, like most analysts, was serving his company's investment banking needs rather than investors. Critics of the landmark settlement note that despite supposed new barriers, investment banking and research divisions will remain under the same corporate banner, and they complain that criminal prosecutions were not included.

"Is Wall Street fixed? Ha, not by a longshot," investor George Mickelis says. "What have they done to restore my confidence? Zero. Zip."

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