Did Sandy Play Dirty?

He's not corrupt, Jack Grubman says; he's just a liar and a braggart. A former star analyst of telecom companies for the Salomon Smith Barney unit of Citigroup, Grubman says that when he upgraded his investment opinion of AT&T in November 1999--after years of dissing the stock--it had nothing to do with winning investment-banking fees for Salomon, helping his boss Sanford Weill survive a power struggle or getting the Grubman twins into an exclusive nursery school. A string of emails in which he raised all these issues--and which were obtained by reporters last week--are "baseless," invented by him "to inflate my professional importance," Grubman asserted in a written statement.

You can't simply dismiss that defense. Grubman, 49, has spent much of his life puffing up his image. He has lied about his schooling and which Philadelphia neighborhood he grew up in. At the height of the telecom bubble, he saw himself less as a stock analyst than as a power broker, socializing with CEOs, including WorldCom's Bernie Ebbers, and offering them advice. But the newly obtained e-mails, brought to light in New York State attorney general Eliot Spitzer's probe of conflicts of interest on Wall Street, are being taken seriously by those investigating Grubman. The e-mails fit squarely into a familiar pattern of greed and influence peddling, and now the picture is far more vivid.

We have known for a while that analysts duped investors, advising them to buy stocks that the analysts privately felt should be avoided. Such cheerleading helped the analysts' investment-banker colleagues win lucrative stock-underwriting assignments and boosted the annual bonuses of both bankers and analysts. What's new is the appearance that Grubman and perhaps Weill abused their power to gain the upper hand in such personal matters as gaining entrance to the right school or winning the support of a director in a boardroom coup.

Grubman, who was paid $20 million a year at his peak, said in an e-mail to a friend that he upgraded his opinion of AT&T so that his ultimate boss, Citigroup's then co-CEO Weill, would help him "get my kids in 92nd St. Y preschool (which is harder than Harvard)." Unlike the Y associations in most cities, this one, located on Manhattan's wealthy Upper East Side, charges as much as $14,400 a year for kids ages 2 1/2 to 5, some of whom get picked up after class by chauffeurs. The school has just 65 openings a year, for which it interviews 300 children and their parents. Woody Allen, Michael J. Fox, Kevin Kline and Sting have sent their kids there. In 1999 the New York Observer reported that Madonna's little girl Lourdes was turned down.

Grubman, the only son of a Philadelphia boxer turned city worker, wanted his kids to have the best, and made that plain in a Nov. 5, 1999, memo to Weill. "For someone who grew up in a household making $8,000 a year and attended public schools, I do find this process a bit strange, but there are no bounds for what you do for your children," Grubman wrote.