Did Sandy Play Dirty?

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Weill made a call on Grubman's behalf and pledged a $1 million donation from Citi to the 92nd Street Y. Linking that support to Grubman's upgrade of AT&T stock is "utter nonsense," Weill says. Yet last week Weill acknowledged for the first time that he had asked Grubman to "take a fresh look" at his neutral rating on AT&T just before Grubman turned bullish and AT&T awarded Citi a nearly $45 million investment-banking job taking public the company's wireless division. Investigators are interested in that link and the possibility that Weill sought Grubman's upgrade to win favor with AT&T CEO Michael Armstrong, who sits on Citi's board. In an e-mail , Grubman said that Weill needed the support of Armstrong to "nuke" Weill's then co-CEO John Reed and gain full control of the company. Says Weill: "I would never attempt to manipulate a board member's vote."

Grubman's I-made-it-all-up defense severely undermines his credibility at a moment when he's entangled in multiple investigations and lawsuits. "Mr. Grubman is what you'd call a third-class witness," says Alan Bromberg, a securities-law professor at Southern Methodist University. "Who's going to believe him?"

Just a couple of years ago, Grubman's word was gold. His "buy" rating on a telecom stock would send investors rushing to own it. But when favorite Grubman stocks like Global Crossing, WorldCom and Winstar began to slide in 2000, so did Grubman's clout. He has come to embody everything that went wrong on Wall Street in the late '90s, as it blended investment advice with investment banking. That mix was long taboo, yet Grubman brazenly played both roles and once boasted that "what used to be a conflict is now a synergy."

Business associates and colleagues describe Grubman, who occupied an outsize corner office at Salomon's lower Manhattan headquarters, as generally quiet and focused, with few friends, though he would often hog the stage during conference calls. Says a former Salomon analyst: "We'd all just groan. Nobody had the clout to tell him to stop."

Grubman was a math whiz in high school and was a member of the debate team, marching band and National Honor Society. He listened to heavy metal and at parties would rip phone books in half to impress the girls. Proud of his father's brief boxing career, he would often cock his arm and make ready to land a punch on your jaw, says a former classmate, Jacob Zamansky. Grubman's first job was in strategic planning at AT&T. He later became an analyst at PaineWebber but made his name at Salomon pounding the table for WorldCom in the mid-'90s, with the stock trading in the teens. As it rose to its high near $62 in 1999, so did Grubman's reputation, and his relationship with Ebbers got downright cozy--Grubman even attended Ebbers' wedding that year. "Grubman was solicitous, fawning, like a groupie," says a source close to the WorldCom board. "This was not a natural friendship." And as Grubman's star rose with Ebbers', so has it fallen just as quickly. --With reporting by Julie Rawe/New York