The Regents - University of California | Office of The President
The Regents - University of California | Office of The President
The Regents - University of California | Office of The President
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
1<br />
2<br />
3<br />
4<br />
5<br />
6<br />
7<br />
8<br />
9<br />
10<br />
11<br />
12<br />
13<br />
14<br />
15<br />
16<br />
17<br />
18<br />
19<br />
20<br />
21<br />
22<br />
23<br />
24<br />
25<br />
26<br />
27<br />
28<br />
administer <strong>of</strong> WorldCom’s employee stock option plan generating fees and<br />
brokerage clients for Salomon. Both companies depended upon each other’s<br />
success to drive their businesses.<br />
B. Salomon Provided WorldCom Executives With Stock in IPOs and<br />
Favorable Analyst Reports in Exchange for WorldCom’s<br />
Investment Banking Business<br />
188. In order to make sure that it received WorldCom’s investment<br />
banking business, Salomon engaged in a quid pro quo with WorldCom executives<br />
whereby Salomon provided IPO shares to Ebbers and Sullivan, in return for<br />
WorldCom’s investment banking business. As part <strong>of</strong> the deal, Salomon’s top<br />
telecommunications securities analyst, Jack Grubman, provided favorable ratings<br />
<strong>of</strong> the company which benefitted both Salomon and WorldCom.<br />
189. On September 30, 2002, the Attorney General <strong>of</strong> New York, Elliott<br />
Spitzer, filed a complaint against Ebbers, Sullivan and others alleging that Salmon<br />
and its predecessors engaged in a practice called “spinning” which involved<br />
Salomon providing favored executives with nearly risk-free shares <strong>of</strong> stock in<br />
companies which were about to go public. In a quid pro quo, the executives<br />
reaped enormous pr<strong>of</strong>its from the selling <strong>of</strong> the IPO stock and the executives<br />
selected Salomon as their company’s investment banking for their public<br />
<strong>of</strong>ferings.<br />
190. On August 26 and 30, 2002, Citibank produced documents in<br />
response to a subpoena by the House Committee on Financial Services which<br />
disclosed the executives who received this favorable treatment. Exhibits “F” and<br />
“G. ” <strong>The</strong> documents, and Citibank’s testimony, demonstrate that these<br />
executives earned over $18 million pr<strong>of</strong>its due to these IPO deals. Ebbers and<br />
Sullivan <strong>of</strong> WorldCom both received IPO stock. Ebbers and Sullivan made<br />
substantial pr<strong>of</strong>its from the IPO stock.<br />
191. As a part <strong>of</strong> the deal, Salmon made sure that its analysts gave<br />
favorable reports about the company. Research analysts are supposed to be<br />
68<br />
COMPLAINT
Change language