IMPACTLAW - Key Persons
Bear Stearns performed clearing operations for A.R. Baron, the former brokerage firm that, on account of its fraudulent practices, had its broker/dealer registration revoked (October 1996). A clearing firm acts as an administrator for smaller firms, settling transactions, handling confirmations, and making sure that trades are executed within a set time span. According to the SEC, Bear Stearns, while operating as a clearing firm:
Jack Grubman, Smith Barney's former telecom stock analyst, resigned from his position in August 2002, due to professional and personal hardship brought on by investigations into his stock ratings. Grubman maintains that he acted in line with fair dealing standards and published ratings he believed to be accurate. His ratings had a history of being highly respected and trusted by investors. However, as telecom stock values fell, his bullish ratings were accepted with growing hesitation. By the time Grubman lowered his ratings of nearly worthless stocks from "buy" to "neutral," investors had lost millions. In one telling example, Global Crossing, which was rated at "buy" until October of 2001, went bankrupt only four months later (January, 2002). Grubman's ratings of WorldCom also remained high during the telecom bust and were not dropped until March of 2002, just months before the company's collapse. In April of 2003 Grubman was fined $15 million and barred from serving in the securities industry by the SEC and other regulators.
Richard Harriton, the former President of Bear Stearns, was banned from the securities industry in April, 2000 as part of the SEC settlement he agreed to. Harriton allegedly "directed Bear Stearns to take various actions to prop up Baron." According to the SEC's charges, Harriton knew of the fraudulent acts being committed by Baron, and continued to clear unauthorized trades. Further allegations against Harriton focused on a "nominee account" he was in the process of setting up with Baron's Principal, Andrew Bressman. Through the account, Harriton would have personally profited on Baron's IPOs. Harriton was required to pay $1 million to settle the charges. He did not admit to wrongdoing.
Salomon Smith Barney is the investment banking division of Citigroup. Investigations that focused on the integrity of Smith Barney's telecom ratings were recently launched. The firm was accused of intentionally giving false stock ratings during the telecom bust in an effort to lure and keep investment banking clients. The securities fraud investigation against Salomon Smith Barney began in 2002 under Eliot Spitzer, New York's Attorney General, and ended in April 2003 in a $400 million settlement.
Investigations are being made into the ratings published by Smith Barney of these companies:
24/7 Media
Adelphia Business Solutions
Enron
FLAG Telecom Holdings, Ltd.
Focal Communications
Global Crossing
Level 3 Communication, Inc.
McLeodUSA, Inc.
Metromedia Fibre Network International
Quokka Sports
Webvan
Williams Communication Group
Winstar Communications
WorldCom
XO Communications Group
Smith Barney Settlement
Smith Barney settled with regulators of the securities industry in April of 2003. The firm agreed to pay $400 million (double what Credit Suisse First Boston and Merrill Lynch were required to pay).
Job Titles:
- Bear Stearns 's Research Analyst