HERE COMES THE BRIBE By JESSICA SOMMAR
Disgraced Salomon Smith Barney analyst Jack Grubman was so close to WorldCom Chairman Bernie Ebbers that he attended Ebbers' wedding - and then expensed the trip to his firm, records obtained by The Post show.
A 1999 expense report shows that Grubman racked up a bill of $1,111.88 attending the Ebbers nuptials in Jackson, Miss., as well as meetings.
Perhaps most incriminating is a stamp on the report indicating that the expense may have been covered by Salomon Smith Barney's investment banking division, not its research department.
"This is a blockbuster revelation," said Robert Heim, former assistant regional director for the SEC and a partner at Meyers & Heim. "It shows [Grubman] completely crossed the line between an objective analyst and personal friend when it came to WorldCom."
"It could open up a whole new avenue for criminal investigators to explore with regards to Grubman's undisclosed relationships with WorldCom officers," he added.
The document was obtained from Citigroup's Salomon Smith Barney by subpoena from the House Financial Services Committee on Monday. The committee is investigating the WorldCom debacle as well as analysts conflicts of interest.
Most incriminating, legal eagles say, is the stamp in the top left-hand corner that reads "IBD." That stamp appears to indicate that Grubman's expenses were paid by the investment banking division - not by the research department, where he worked.
The stamp is "an indication that [Grubman] may have been only a nominal employee of the research department, but in actuality was an employee of the investment banking department," said Christopher Bebel, former prosecutor and partner at Shepherd Smith & Bebel.
"It's deceptive," Bebel added. "If this is true, it's very incriminating to the firm. The key anti-fraud provision of the federal securities laws prohibits deception in the securities markets and if he was in fact regarded as a de facto employee of the investment banking department, it becomes apparent that Grubman and Salomon Smith Barney perpetrated a major fraud upon the public."
"Mr. Grubman has already testified about his attendance at this event," a Salomon Smith Barney spokeswoman said. "Thecosts 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."
Jack Grubman resigned two weeks ago amid a hail of criticism and scrutiny from lawmakers, regulators and prosecutors. Grubman worked for 17 years as a research analyst and became famous for his telecom stock touting during the go-go '90s.
But Grubman held highest ratings on WorldCom stock until several days before the giant telecom admitted to financial shenanigans that caused the company to restate earnings by $3.9 billion dollars.
Since then, the Jackson, Miss.-based company has added an additional $3.3 billion in restatements and filed for the nation's largest-ever bankruptcy, sparking multiple investigations into its downfall. Salomon reportedly earned $80 million in investment banking fees from WorldCom.
This week, Scott Sullivan and Buford Yates, the former CFO and accounting exec at WorldCom, were indicted on seven counts by the Justice Department. Three others are expected to make plea deals with federal prosecutors.
The Securities and Exchange Commission, New York Attorney General's office and the National Association of Securities Dealers have probes into Salomon Smith Barney and Grubman's relationship with WorldCom. Neither the SEC, the AG's office nor Grubman's lawyer returned calls. Nor did Salomon Smith Barney officials.