Citigroup Is Likely to Receive New Subpoena

Congressional investigators are expected to send a new subpoena to Citigroup Inc. asking for more information about hot stock offerings the bank’s Salomon Smith Barney brokerage allocated to WorldCom Inc. executives, sources said Thursday.

Meanwhile, House staff released a document showing that former Salomon telecom analyst Jack Grubman in 1999 expensed air fare for a trip that partly involved his attendance at the wedding of Bernard J. Ebbers, former chief executive of WorldCom. The cost was borne by Salomon’s investment banking arm.

A new subpoena by the House Financial Services Committee would need the approval of Rep. Michael G. Oxley, (R-Ohio), the committee chairman, but it is expected that the order would be sent in the next few days.

“We’re evaluating all the information we have from Citigroup and determining whether another subpoena would be necessary,” said Peggy Peterson, a committee spokeswoman.

Rep. John J. LaFalce, (D-N.Y.), the ranking Democrat on the committee, is “concurring with the need for a second subpoena,” said Jennifer Gore, a spokeswoman for LaFalce. Because Congress is in recess until next week, LaFalce would have to sign off on new subpoena requests in the interim.

The committee is investigating whether Salomon Smith Barney distributed sought-after shares of initial public stock offerings to WorldCom officials in recent years, including Ebbers, to win investment banking business.

Securities rules bar brokerages from explicitly rewarding executives who bring in banking business. Citigroup and Salomon have denied wrongdoing.

The new subpoena would seek specific dates WorldCom officials acquired IPO shares, when and for how much the shares were sold, and who bought them, Gore said.

Documents gathered in an initial subpoena and released this week showed that Salomon granted almost 900,000 shares of various IPOs to Ebbers from 1996 to 2000. But the documents didn’t show how much profit Ebbers made.

“The committee’s new subpoena seeks information they failed to request in their original subpoena, and we were unable to provide it because of privacy laws,” Salomon said in a statement.

Investigators also have been probing the role of Salomon’s Grubman in touting telecom stocks, including WorldCom, that subsequently collapsed. Grubman’s relationship with Salomon’s investment banking department also has been under scrutiny.

On Thursday, the House committee released a Salomon expense report that illustrated the personal tie between Grubman and Ebbers.

The April 1999 expense form showed Grubman listed a $1,111.88 expense for a first-class plane ticket for “Bernie Ebbers’ wedding and meetings” the prior month.

It is unusual on Wall Street for brokerage analysts to have close personal relationships with executives whose companies the analysts are expected to objectively rate.

Grubman, who resigned from Salomon this month, has denied any wrongdoing. His attorney could not be reached Thursday for comment.

In a statement, Salomon said, “Mr. Grubman has already testified about his attendance at this event.” As for the charging of the expense to investment banking, the firm said, “The costs of the research department are borne by three profit centers: investment banking, retail and equities. In this instance, the expense was charged to the bank.”