The Wall Street Fix
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In May 2000, former Salomon Smith Barney broker David Chacon sent the following memo to a Salomon Smith Barney vice president to protest what he viewed as improper IPO allocations to corporate banking clients, including Bernie Ebbers, in an effort to gain further business. Chacon writes that he is troubled by Jack Grubman's "well known conflicts and resulting misguidance to our retail clients."


May 25th, 2000
Attn: Jay Mandelbaum
VP Sales & Marketing
Salomon Smith Barney


You may recall my name from my involvement with Rick Olson, Director of Private Wealth Management, in representing the firm for MyCFO. Unfortunatly, this message is being delivered today with regret. I'm confident however, that upon review of the facts, you will agree, I have been left with no other recourse than to call upon you today. In fact, I have discussed these same concerns detailed below, on several occasions with management prior. I have complained, in no uncertain terms to Jerry Ebberhart, Greg Laesch and Bob Perry about the following concerns. Additionally, although they have confirmed my understanding of the issues involved, unfortunately to date they have not rectified these conflicts of interests so I will detail these concerns to you as follows:

1) Improper allocation of "hot" IPO issues to corporate banking clients including officers and directors of WCOM, LVLT, and Qwest. At best, the timing, placement and quantity of many of these offerings appear to be questionable. At worst, I fear they may be construed by some as "criminal." In one particular instance raised to both Bob Perry and Greg Laesch, I was informed the placement of RTHMs' to Bernard Ebbers was to "encourage him" in granting additional banking business to our firm. Shortly thereafter, my understanding is that our firm was awarded the M&A mandate for a VERY large deal by the same individual. Perry's reply to my concern was, "that's how the game works." We pay them, and they pay us back." Although Laeschs' response was that "he would look into it." This same practice was replicated more recently on the KQIP directed share offering. Though I was forced to turn away approved participants by management, citing it was past the deadline to indicate, several days after the stock had traded for a large premium, these same shares were redirected into the hands of banking clients. In this instance, I raised the issue with Jerry Ebberhart who had no response.

2) Grubman may be out of line on his research calls. After yesterdays' reiteration of GBLX as a "buy" with a $70 target, I can no longer look past his well known conflicts and resulting misguidance to our retail clients. This issue was first brought to Bob's and Scott's attention in February of last year when Jack raised his price target on LVLT and in the same day announced a secondary offering. Again most recently, issues were raised by me on GBLXs' secondary offering. On both secondary offerings LVLT and GBLX, it was very difficult discover that insiders were in fact selling. This is particularly troubling, and places me and the firm at risk. As you know, we handle a number of insiders of GBLX out of this office. Back in April I personally fielded a call from a Director of GBLX and was insulted to learn that contrary to his then current recommendation, "Jack" says sell. Additionally, it appears that some of these insider sales may not have been properly disclosed to the public. Again on more than one occasion, I discussed my concern to management and even brought the issue to Laesch. All three individuals commented in response that "buyer beware" is the standard for investors and that is my job to identify these conflicts and determine suitability for my clientele.

Based on my experience and knowledge of your high standard of ethics, I'm confident we can work together to resolve these issues in a professional manner. I appreciate the opportunity to be employed at a firm that, while challenged at times, places its clients' interests first. I'm sure you can realize my reluctance to come forward sooner as well as my desire to deal with this compliant discreetly. I have enclosed documentation which will shed light on these concerns. Please do not hesitate to call upon me for questions or further assistance.



David Chacon

Senior Vice President


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published may 8, 2003

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