World Bank Halts Business Dealings With Salomon : Brokerage: The international agency cites the scandal surrounding the firm. Also, federal investigations have widened to include three big investment funds.

Beleaguered Salomon Bros. was hit with more bad news Wednesday, as the World Bank, a major client, suspended all business dealings with the giant Wall Street brokerage and investment bank until at least Sept. 30.

Separately, sources confirmed that the government’s investigations of Salomon’s admitted wrongdoing in Treasury auctions have widened to include the activities of at least three big investment funds--all Salomon clients that bought billions of dollars of government notes and bonds in recent months.

Salomon confirmed that several of its executives, including Thomas W. Strauss, who resigned Sunday as president, were investors in one of the funds, Steinhardt Partners.

Salomon’s stock continued its steady slide Wednesday, closing down 75 cents at $24.75 in New York Stock Exchange trading, on a day when the Dow Jones industrial average soared more than 88 points.

Salomon has admitted that it covertly bought more than the maximum allowable share of securities in Treasury auctions and made bids in the names of customers who hadn’t authorized them.

The Washington-based World Bank is an international organization that makes loans for projects in developing countries. Its treasurer, Donald Roth, noted Wednesday that the bank is one of the largest issuers of notes and bonds in financial capitals around the world.

“As a result, the integrity and efficiency of government bond markets are of paramount importance to the World Bank,” Roth said. “We have to express our profound concern when somebody tampers with the these markets.”

In a statement, the firm said: “Salomon Bros. would like to apologize to the World Bank and its member governments for any embarrassment caused by our actions. We will continue to ensure that all necessary corrective measures are implemented promptly and we will work closely with the World Bank to secure a resumption of our business dealings as soon as possible.”

The bank said it would review the suspension on Sept. 30. Neither the bank nor Salomon would disclose the dollar value of the business that the bank has done with Salomon. But Roth said Salomon was a joint manager of a $2-billion bond issue the World Bank did earlier this year and also handled the private placement of several issues of World Bank securities.

In other developments Wednesday, California Treasurer Kathleen Brown said the state will no longer buy commercial paper, which amounts to a form of short-term borrowing by Salomon. California holds $230 million in commercial paper, which the state will not roll over when it comes due. The move isn’t expected to have a significant effect on Salomon.

The government’s inquiry into the investment funds that did business through Salomon was described Wednesday as preliminary, and sources close to it said investigators so far haven’t turned up conclusive evidence of wrongdoing. The sources said Justice Department lawyers have been in contact with Tiger Management Co. and Quantum Fund, led by investor George Soros, as well as Steinhardt Partners.

Patrick B. Duff, managing director of Tiger, confirmed that the firm is a Salomon client but declined to comment on its dealings in Treasury auctions or the government inquiries. Gary S. Gladstein, a managing director at Soros Management, also confirmed that Quantum and Soros are customers of Salomon’s but declined to comment further. Repeated calls to Steinhardt executives Wednesday were not returned.

Robert F. Baker Jr., Salomon’s spokesman, described the Salomon executives’ investments in Steinhardt as routine.