Jack Grubman was a powerful man on Wall Street. As a star analyst of telecom companies for the Salomon Smith Barney unit of Citigroup, he made recommendations that carried a lot of weight with investors. For years, Grubman had been negative on the stock of AT&T. But in November 1999, he changed his opinion. Based on e-mail evidence, it appears that Grubman's deci- sion to upgrade AT&T wasn't based on the stock's funda- mentals. There were other factors involved.

At the time, his boss at Citigroup, Sanford "Sandy" Weill, was in the midst of a power struggle with co-CEO John Reed to become the single head of the company. Meanwhile, Salomon was looking for additional business to increase its revenues. Getting investment banking busi- ness fees from AT&T would be a big plus. And Salomon's chances of getting that AT&T business would definitely be improved if Grubman would upgrade his opinion on the stock. Furthermore, Weill sought Grubman's upgrade to win favor with AT&T CEO Michael Armstrong, who sat on

Citigroup's board. Weill wanted Armstrong's backing in his efforts to oust Reed.

Grubman had his own concerns. Though earning tens of millions a year in his job, as the son of a city worker in Philadelphia, he was a man of modest background. He wanted the best for his twin daughters, including entry to an exclusive New York City nursery school (the posh 92nd Street Y)-a school that a year earlier had report edly turned down Madonna's daughter. Weill made a call to the school on Grubman's behalf and pledged a $1 mil lion donation from Citigroup. At approximately the same time, Weill also asked Grubman to "take a fresh look" at his neutral rating on AT&T. Shortly after being asked to review his rating, Grubman raised it, and AT&T awarded Salomon an investment-banking job worth nearly $45 million. Shares of AT&T soared.

Did Sandy Weill do anything unethical? How about Jack Grubman? What do you think?