SSB conflicts further exposed as Spitzer raises stakes.

(From Financial News (Daily))

Further evidence has emerged of conflicts of interest at Salomon Smith Barney's research division as Eliot Spitzer, New York State attorney general, took a new step in his battle to correct Wall Street's excesses.The evidence came to light in a lawsuit against Bernie Ebbers, former chairman of WorldCom, and four other corporate executives. The lawsuit, brought by Spitzer, demands they repay profits they made from hot initial public offerings.

The suit demands that Ebbers and executives past and present from Qwest Communications, MetroMedia and McLeod USA repay $28m they made by selling IPO shares allocated by SSB. Spitzer also wants the executives to repay an estimated $1.5bn they made from selling stock and options of their own companies.

SSB is not a defendant in this lawsuit. But to support his case Spitzer has brought out evidence pointing to conflicts interests in the bank's research division, as well as infighting among senior executives.

The attorney general is arguing that the hyping of stocks through SSB's research was integral to a bigger scheme that enriched bankers, analysts and corporate executives while leaving retail investors out of the loop on important information.

As well as Ebbers, Spitzer is suing Philip Anschutz, former chairman of Qwest, Joe Nacchio, former CEO of Qwest, Stephen Garafalo, chairman of MetroMedia and Clark McLeod, former CEO of McLeod USA. Jack Grubman, SSB's former telecom analyst, was in charge of covering these executives' companies.

Four of the executives made big profits from selling their own stock, which the case will argue were boosted by artificially-maintain buy ratings from ...