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
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203. Grubman attended at least three closed-doors Board <strong>of</strong> Directors’<br />
meetings. In those meetings, he learned insider information which he was legally<br />
prohibited from disclosing until the company disclosed the information.<br />
204. Grubman also advised Ebbers on takeover strategy. He advised<br />
WorldCom on strategy for the MCI merger and then touted the merger to the<br />
market. According to the Tulsa World <strong>of</strong> October 4, 1997, “<strong>The</strong> job <strong>of</strong> persuading<br />
Wall Street that WorldCom is up to the task <strong>of</strong> buying MCI will fall to Jack<br />
Grubman, Salomon’s senior telecommunications analyst.” If the WorldCom/MCI<br />
merger did not go through, Salomon stood to lose hundreds <strong>of</strong> millions <strong>of</strong> dollars.<br />
Grubman was also a key advisor on the Sprint merger.<br />
205. Grubman told WorldCom in advance about the questions he was<br />
going to ask during Analysts Telephone calls and worked with WorldCom so that<br />
they would be able to present the most positive spin on the company as possible.<br />
206. Effective October 23, 2000, the SEC issued Rule FD (for Fair<br />
Disclosure), 17 CFR Parts 240, 243, and 249, which prohibits companies from<br />
providing analysts with insider information. This rule was enacted in response to<br />
the incestuous relationships between analysts and corporations. Ebbers and<br />
Grubman ignored this rule.<br />
E. Grubman Touts WorldCom Stock Notwithstanding<br />
His Knowledge <strong>of</strong> Adverse Information about<br />
WorldCom’s True Financial Condition<br />
207. During the time that Grubman was advising WorldCom, he was<br />
touting its stock and he was a driving force in helping WorldCom maintain its<br />
value. Between 1995 and April 22, 2002, Grubman and Salomon issued dozens <strong>of</strong><br />
analyst reports which made false representations and omitted material facts. In<br />
issuing these reports, Salomon knew that it would serve to increase or inflate the<br />
price at which WorldCom stock traded, compared to the price it would have traded<br />
had the WorldCom analyst report not been issued. Salomon issued these reports<br />
with the intention <strong>of</strong> increasing and inflating the price at which WorldCom stock<br />
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COMPLAINT
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