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The Wall Street Fix
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at&t and the 92nd street y

In the course of New York State Attorney General Eliot Spitzer's investigation into Salomon Smith Barney and Citigroup, Citigroup CEO Sandy Weill admitted to having asked Salomon Smith Barney telecom analyst Jack Grubman to take another look at his "neutral" rating on AT&T stock. Grubman sent Weill the memo below in November 1999, shortly before he upgraded his recommendation on AT&T's stock from "neutral" to "buy." In the memo, Grubman reports back on a "good" meeting with AT&T CEO Michael Armstrong. He then switches gears and asks for Weill's help in gaining admission for his children into the exclusive 92nd Street Y preschool. Grubman's children were later admitted and Citigroup gave a $1 million donation to the school.

In an e-mail to a social friend in January 2002, Grubman wrote:

You know everyone thinks I upgraded [AT&T] to get lead for [AT&T Wireless]. Nope. I used Sandy to get my kids in 92nd ST Y pre-school (which is harder than Harvard) and Sandy needed Armstrong's vote on our board to nuke Reed in showdown. Once coast was clear for both of us (ie Sandy clear victor and my kids confirmed) I went back to my normal negative self on [AT&T]. Armstrong never knew that we both (Sandy and I) played him like a fiddle.

However, both Weill and Grubman deny that there was a quid pro quo or that Grubman changed the rating to obtain banking business for Salomon in AT&T's spinoff of its wireless division or to help Weill in his boardroom battles with then Citigroup co-CEO John Reed. Grubman disavowed the e-mail after it was leaked to the press, and said that he had been showing off to impress a friend. In his investigation, New York State Attorney General Eliot Spitzer declined to press criminal charges against either man.


TO: Sanford I. Weill
FROM: Jack B. Grubman
DATE: November 5, 1999
RE: AT&T and the 92nd Street Y

Sandy, I had a good meeting with Mike on Thursday -- we met for about 2 1/2 hours and discussed a lot of things including some announcements that will occur at the December 6th Analyst Meeting and how to position them.

My next meeting is November 10th in Denver and I will be spending the entire day with Dan Somers and the cable team. I told Dan that I wanted a "no-nonsense, meat and potatoes meeting." In other words, not the typical meeting that is conducted out there where they show a bunch of glitzy demonstrations and no one learns anything.

So, for the whole day I will be at the AT&T cable facilities in Denver, rolling up our sleeves and doing very dry, arcane, cost and engineering analysis. The following day on November 11th, I will be arriving in Basking Ridge around 1:00pm and I will be meeting with Frank Ianna and the network boys for a few hours to really put them through the paces on what they're doing. Afterwards, Mike and I will get together around 4:00pm to wrap things up.

I think all of this will be very productive and, frankly, while this process has taken awhile to unfold, the sense of urgency on Mike's part clearly is allowing me to do the type of "no-nonsense" meetings that, unfortunately, are difficult to schedule with AT&T or at least have been in the past. Anyhow, I will keep you posted on the progress but I think we had a very good meeting on Thursday and I expect I'll have very good meetings in Denver and Basking Ridge next week.

On another matter, as I alluded to you the other day, we are going through the ridiculous but necessary process of pre-school applications in Manhattan. For someone who grew up in a household with a father making $8,000 a year and for someone who attended public schools, I do find this process a bit strange, but there are no bounds for what you do for your children.

To give you some details, our children -- Davis and Elizabeth Grubman -- are currently 2 years, 5 months-old, boy and girl twins and they will be 3 years, 3 months-old when they enter nursery school in September 2000 (which is the admissions date that we are applying for). Of the schools we've looked at, the 92nd Street Y is, without question, the one we'd love our children to attend. To us, it has the right mix of educational and developmental programs and it has a healthy Jewish culture without being over the top on the religious scale. Given that it's statistically easier to get into the Harvard Freshman Class than it is to get into pre-school at the 92nd Street Y (by the way, this is a correct statement), it comes down to "who you know."

Attached is the list of the Board of Directors from the 92nd Street Y. Fred Salerno is helping me with Patricia Cayne, who I think is Jimmy Cayne's wife from Bear Stearns, and Fred is on the Board of Bear Stearns or at least was. However, if you feel comfortable and know some of these board members well enough, I would greatly appreciate it if you could ask them to use any influence they feel comfortable in using to help us as well. I noticed Bill Heyman is on the board and I think he works somewhere in the Citigroup corporate structure but I don't really know Bill.

Anyway, anything you could do Sandy would be greatly appreciated. As I mentioned, I will keep you posted on the progress with AT&T which I think is going well.

Thank you.


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published may 8, 2003

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