The Regents - University of California | Office of The President

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232. Grubman’s staff also had access to confidential insider information.
The House Financial Services Committee has released e-mails showing that in the
morning of June 24, 2002, a Salomon bond analyst, Robert Waldman, sent an e-
mail to WorldCom asking about rumors of a major accounting problem.
Publically, Waldman issued a report telling investors that they should not be
concerned about Grubman’s downgrade of the stock three days earlier.
F. Salomon Made Misrepresentations and Omitted
Material Facts to Retain its Lucrative Fees from WorldCom
233. When Salomon issued its WorldCom analyst reports, it had in its
possession material, adverse and non-public information regarding its role in
Salomon’s investment banking business and it knew that this information was
material, adverse, non-public information which reasonable investors deciding to
invest would want to know in making their investment decision.
234. When Salomon issued its WorldCom analyst reports, it knew that
issuing the reports would, as had its prior reports, serve to increase or inflate the
price at which WorldCom stock traded, compared to the price it would have traded
had Salomon not issued the WorldCom analyst report. Salomon issued the
WorldCom analyst reports with the intention of increasing and inflating the price
at which WorldCom stock would trade.
235. Salomon issued its false and misleading analyst reports as part of
Salomon’s effects to obtain substantial investment banking and advisory fees.
236. In each of its WorldCom reports, Salomon stated a “reason for the
report.” The stated reason for the report was false and misleading because it failed
to disclose the true reason Salomon issued each report was to assist Salomon in its
efforts to obtain investment banking fees.
237. Salomon’s WorldCom analyst reports were false and misleading
because Salomon failed to disclose in those analyst reports that it based its
decisions as to which companies to cover in analysts reports and as to what it
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COMPLAINT