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American Morning
Minding Your Business: Hickory Dickory Dock, Grubman Upgraded a Stock
Aired November 18, 2002 - 09:22 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: Boosting a stock rating may be easier than you think. Andy Serwer is here "Minding Your Business."
Good morning.
ANDY SERWER, "FORTUNE" MAGAZINE: Good morning to you.
This is truly amazing. It's a bit of a New York story, in that only people in Manhattan may understand how difficult it is to get kids into private school.
ZAHN: It's a nightmare.
SERWER: It's a nightmare. But it is a story that people outside in the rest of the country can understand, because it involves malfeasance, skullduggery, bad stuff by people on Wall Street. This is how it works, Salomon Smith Barney analysts Jack Grubman covered AT&T, and he raised the recommendation on AT&T's stock, so that the head of CitiGroup, Sandy Weill, could curry favor with the head of AT&T Mike Armstrong, and then, in return, Sandy Weill, CitiGroup, made a donation to a nursery school to help get Grubman's kid in.
ZAHN: So this is all about getting your kid into nursery school?
SERWER: It's all about getting your kids into nursery schools. In other words, investors out there want to read these research reports, and they think these analysts are doing the best they can, an honest job, but basically, this guy just said, this stock's a buy, so I can get my kid into nursery school. That's what's going on here.
ZAHN: Apparently. But then what happened? Where did the money come from to go to the nursery school?
SERWER: The money came from CitiGroup. And we have a statement here from CitiGroup. Let's see if we can get it up there, where they say, "From the outset, it was clear, Mr. Grubman sought Mr. Weill's help for the twins in the fall of 1999 and the contribution we ultimately made in the summer of 2000 grew out of that request."
ZAHN: There's nothing illegal there, is there?
SERWER: You know, Eliot Spitzer might take issue with that, because the New York state attorney general, actually he supervises nonprofits in New York City, and he has been investigating the 92nd Street Y. I saw him last week, and he acknowledged he was getting into this, questioning people at the 92nd Street Y about this specific problem, and about the analysts rating.
So problems with Grubman, problems for CitiGroup and problems for Sandy Weill, and this nursery school-gate, as we're calling it, is not going away, and it's truly amazing stuff.
ZAHN: But if any of us go to corporations to solicit for money for them for a charity, I mean, that is pretty common practice. The unusual thing is that you can tie the raising of a stock rating to all of this?
SERWER: Yes, the stock rating. Quid pro quos like that go on from time to time. That is not so cool by itself, but changing a stock rating is where it gets really, really bad.
ZAHN: So who gets in trouble for this?
SERWER: Well, Grubman is already in a lot of trouble. The question is, how is it going to impact Sandy Weill? Is he going to get in trouble over of this.
ZAHN: What do you think? It doesn't look good.
SERWER: It doesn't look good. It's hard to say. I mean, he's way up there, but we'll see what happens to him.
ZAHN: Keep us posted, Andy.
SERWER: I will.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Upgraded a Stock>
Aired November 18, 2002 - 09:22 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: Boosting a stock rating may be easier than you think. Andy Serwer is here "Minding Your Business."
Good morning.
ANDY SERWER, "FORTUNE" MAGAZINE: Good morning to you.
This is truly amazing. It's a bit of a New York story, in that only people in Manhattan may understand how difficult it is to get kids into private school.
ZAHN: It's a nightmare.
SERWER: It's a nightmare. But it is a story that people outside in the rest of the country can understand, because it involves malfeasance, skullduggery, bad stuff by people on Wall Street. This is how it works, Salomon Smith Barney analysts Jack Grubman covered AT&T, and he raised the recommendation on AT&T's stock, so that the head of CitiGroup, Sandy Weill, could curry favor with the head of AT&T Mike Armstrong, and then, in return, Sandy Weill, CitiGroup, made a donation to a nursery school to help get Grubman's kid in.
ZAHN: So this is all about getting your kid into nursery school?
SERWER: It's all about getting your kids into nursery schools. In other words, investors out there want to read these research reports, and they think these analysts are doing the best they can, an honest job, but basically, this guy just said, this stock's a buy, so I can get my kid into nursery school. That's what's going on here.
ZAHN: Apparently. But then what happened? Where did the money come from to go to the nursery school?
SERWER: The money came from CitiGroup. And we have a statement here from CitiGroup. Let's see if we can get it up there, where they say, "From the outset, it was clear, Mr. Grubman sought Mr. Weill's help for the twins in the fall of 1999 and the contribution we ultimately made in the summer of 2000 grew out of that request."
ZAHN: There's nothing illegal there, is there?
SERWER: You know, Eliot Spitzer might take issue with that, because the New York state attorney general, actually he supervises nonprofits in New York City, and he has been investigating the 92nd Street Y. I saw him last week, and he acknowledged he was getting into this, questioning people at the 92nd Street Y about this specific problem, and about the analysts rating.
So problems with Grubman, problems for CitiGroup and problems for Sandy Weill, and this nursery school-gate, as we're calling it, is not going away, and it's truly amazing stuff.
ZAHN: But if any of us go to corporations to solicit for money for them for a charity, I mean, that is pretty common practice. The unusual thing is that you can tie the raising of a stock rating to all of this?
SERWER: Yes, the stock rating. Quid pro quos like that go on from time to time. That is not so cool by itself, but changing a stock rating is where it gets really, really bad.
ZAHN: So who gets in trouble for this?
SERWER: Well, Grubman is already in a lot of trouble. The question is, how is it going to impact Sandy Weill? Is he going to get in trouble over of this.
ZAHN: What do you think? It doesn't look good.
SERWER: It doesn't look good. It's hard to say. I mean, he's way up there, but we'll see what happens to him.
ZAHN: Keep us posted, Andy.
SERWER: I will.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Upgraded a Stock>
