Jack Grubman, a former Citigroup analyst, boasted in an email that he had temporarily raised his rating on AT&T stock in order to help Sanford Weill, Citigroup's chairman, gain control of Citigroup and to help Grubman get his children into an exclusive Manhattan nursery school. Once they received what they wanted, Grubman lowered his AT&T rating again. Investigators see this email as evidence that Grubman fraudulently misled investors about his true negative view of AT&T in order to receive personal favors from Weill.

1. El analista estrella de Citigroup cambió su recomendación de
compra para las acciones de AT&T durante casi un año para que
sus hijos sean aceptados en una exclusiva guardería de
Manhattan.
November 15, 2002
More Details on Message by Ex-Analyst for Citigroup
By PATRICK McGEEHAN
ack B. Grubman, the former Citigroup analyst, boasted in an e-mail
message early last year that he and Sanford I. Weill, Citigroup's
chairman, had played C. Michael Armstrong, the chief executive of
AT&T, quot;like a fiddle,quot; according to two people who have seen the
message.
In the e-mail message, which Citigroup turned over to regulators
investigating conflicts of interest at Wall Street firms, Mr. Grubman told
a friend that he had temporarily raised his rating on AT&T's stock to
accomplish two goals. One was to gain Mr. Armstrong's support in Mr.
Weill's struggle for control of Citigroup; the other was to secure Mr.
Weill's help in getting Mr. Grubman's children into an exclusive nursery
school in Manhattan.
Once he and Mr. Weill got what they wanted, Mr. Grubman wrote, quot;I
went back to my normal negative selfquot; on AT&T and lowered his rating
on AT&T stock. Mr. Armstrong, he added, quot;never knew that we both
played him like a fiddle,quot; said the people who have seen the e-mail
message, parts of which have been reported over the last two days.
A call to Mr. Grubman's lawyer, Lee S. Richards, was returned by a
spokesman, who did not respond to a request for comment. On
Wednesday, Mr. Grubman said he had concocted the claim that he

2. had helped Mr. Weill win the power struggle quot;to inflate my professional
importance.quot;
A Citigroup spokeswoman, Leah Johnson, said yesterday that no
company official had any more to say about the matter. Mr. Weill on
Wednesday dismissed Mr. Grubman's claim as quot;sheer nonsense,quot;
saying that he quot;would never attempt to manipulate a board member's
vote.quot;
But investigators see the document as a confession by Mr. Grubman
that he had fraudulently misled investors about his true opinion of
AT&T's prospects. Mr. Grubman, the most powerful
telecommunications analyst on Wall Street during the 1990's, held a
negative view on the company for a long time before he raised his
rating in November 1999. In October 2000, he lowered his rating on the
stock to quot;neutralquot; again.
Mr. Weill acknowledged in a statement Citigroup released on
Wednesday that he had asked Mr. Grubman, in late 1998 or early
1999, to quot;take a fresh lookquot; at AT&T. Mr. Weill said he had not tried to
put pressure on the analyst to raise his rating, but other analysts this
week questioned how such a request from the chairman could be
perceived otherwise.
During the 11 months when Mr. Grubman rated AT&T's stock a quot;buy,quot;
the company hired the Salomon Smith Barney investment banking unit
of Citigroup to underwrite the initial public offering of stock in AT&T's
wireless unit. Salomon received fees of about $45 million in that deal.
Many of Salomon's competitors said they thought Mr. Grubman had
changed his rating on AT&T simply to help Salomon's bankers land the
underwriting assignment. But in the e-mail message, Mr. Grubman said
that was a misconception.
He and Mr. Weill had different ulterior motives, Mr. Grubman explained
in the message, which he sent to Carol Cutler, a friend who worked for
a money management company in New York. Ms. Cutler could not be
reached for comment.
Mr. Weill wanted to sway Mr. Armstrong, who is a director of Citigroup,
to side with Mr. Weill in his struggle for power with John S. Reed. Mr.

3. Reed, the former chairman of Citicorp, was co-chairman and co-chief
executive of Citigroup, after the company was formed by the
combination of Citicorp and Travelers Group.
Mr. Weill needed Mr. Armstrong's vote to quot;nukequot; Mr. Reed in the
showdown between the men for sole control of Citigroup, Mr. Grubman
wrote, the people who have seen the e-mail message said. Mr. Reed
resigned from Citigroup in February 2000.
Mr. Grubman wanted Mr. Weill's help in getting his twins into the
nursery school run by the 92nd Street Y. He got that and more.
Mr. Weill, other directors of Citigroup and at least one other powerful
person in business contacted directors of the 92nd Street Y seeking to
help Mr. Grubman's children, said people involved in the investigation
or close to members of the Y's board. Citigroup also followed up with a
pledge to give $1 million to the Y over five years, starting in 2000.
Mr. Grubman is quot;already in a hole and now he's adding thoroughly
credible reasons why he would distort his advice,quot; said John Coffee, a
law professor at Columbia University. Among those reasons are that
he wanted help getting his children into school and that quot;he really
wanted to impress this woman,quot; Mr. Coffee said, referring to Ms.
Cutler.
quot;It doesn't matter which of these reasons is right,quot; he said, quot;either one
of them is digging a deep hole. All the law cares about is that you
knowingly provided to investors inflated advice.quot;
A person involved in the investigation of Citigroup and Mr. Grubman
said Citigroup officials would not deny that the company gave the
money to the Y to get Mr. Grubman's children admitted to the nursery
school.
In a memorandum to Citigroup managers that the company released
late Wednesday, Mr. Weill acknowledged that he made a call on behalf
of Mr. Grubman's children. quot;I tried to help Mr. Grubman because he
was an important employee who had asked for my help,quot; Mr. Weill said
in the memorandum.

4. A spokeswoman for the 92nd Street Y, Alix Friedman, declined
yesterday to discuss how Mr. Grubman's children were admitted to the
school. She said that quot;no child is guaranteed admissionquot; and that every
applicant quot;goes through the same thoughtful, carefulquot; screening
process.
Citigroup's contribution to the Y is being used to underwrite lectures,
readings and dance recitals through 2004, according to Ms. Friedman.
It was not made by the Citigroup Foundation, the company's
philanthropic arm, but came out of corporate funds, according to the
foundation's 2001 annual report.
The annual installment of $200,000 accounted for more than 5 percent
of the $3.56 million in corporate grants, the report said. The company
made few corporate grants larger than the one it made to the Y in
2000.
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