Embattled Grubman Resigns In 'Mutual' Pact With Salomon
By CHARLES GASPARINO Staff Reporter of THE WALL STREET JOURNAL
Jack Grubman, the once high-profile telecommunications analyst at Salomon Smith Barney has resigned from the firm by "mutual agreement," the firm says.
Mr. Grubman sent a letter Salomon executives Thursday afternoon announcing his departure effective immediately, people at the company say. Mr. Grubman is under multiple investigations for issuing hyped-up research calls in order to help his firm win lucrative investment banking deals. But in his letter to Michael Carpenter, chairman and chief executive of the Citigroup unit, Mr. Grubman said he resigned after a "long and careful consideration and with deep regret."
Mr. Grubman expressed regret for "failing to predict" the telecom market's collapse, and said in his letter that "I understand the disappointment and anger felt by investors as a result of that collapse." He added that he was "proud of the work" both he and his fellow analysts competed. "I always wrote what I believe and base my opinions on a long and sincerely held investment thesis."
Mr. Grubman has been one of the highest-profile analysts at the center of a flap over the independence of Wall Street stock-purchase recommendations, because of his close ties to the companies he covered and because he continued to recommend telecommunications companies' shares even as the stock bubble burst.
In particular, Mr. Grubman faced searing questions in Congress over his ties to WorldCom. Mr. Grubman also is the focus of a probe by New York Attorney General Eliot Spitzer over his ties to telecommunications companies while recommending investors buy their shares.
The National Association of Securities Dealers also is looking into whether there were any undisclosed conflicts involving Mr. Grubman's research that may have broken NASD rules.
Salomon itself is at the center of a federal probe into its distribution of shares of initial public offerings. And the House Financial Services Committee served Citigroup a subpoena Tuesday demanding documents that detail any purchase or acquisition of initial public offering shares by WorldCom executives.