Lead Plaintiff's Memorandum of Law in Opposition to Defendants'

Grubman and the Banks
The final gatekeeper -- the Underwriter Defendants who marketed billions of dollars in
WorldCom bonds -- also failed the investing public. In May 2000 and May 2001, WorldCom
borrowed a staggering $17 billion from investors who purchased bonds issued by the Company and
underwritten by the Underwriter Defendants. 196, 203. The May 2001 Offering alone, for nearly
$12 billion, was by far the largest corporate bond offering in the history of the financial markets. 203.
The size and prestige of each of these deals -- and the lucrative investment banking fees to be pocketed
by the underwriters -- attracted some of Wall Street’s largest and most prestigious investment banks,
including Salomon and J.P. Morgan Chase, who served as co-lead underwriters in each of the
Offerings. 198. The investing public looked to the expertise, experience and financial savvy of the
Underwriter Defendants to conduct the reasonable due diligence investigation that the securities laws
required them to do.
The Complaint further demonstrates that one of the lead underwriters for the Offerings was
uniquely positioned to detect that the financial state of affairs at WorldCom was not what it seemed, yet
took steps to camouflage WorldCom’s deteriorating financial condition in order to reap huge fees from
its relationship with WorldCom and its senior officers. At all relevant times, Grubman was Salomon’s
key telecommunications analyst -- the most influential telecom analyst on Wall Street -- and was
renowned as the one man in that sector who could make or break a company. 236. Grubman,
whom Salomon represented to be an “independent” research analyst, issued dozens of analyst reports
on WorldCom, invariably extolling the virtues of the Company and its management. 249. Grubman
urged investors to “load up the truck” with WorldCom stock, pronounced Ebbers a “visionary,” and
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