2003-04-28 sec-litreleases pdf 15 KB 3,683 chars

SEC v. : 03 Civ. 2945 (WHP)

Exhibit of Federal Court Approves Settlement of SEC Enforcement Actions Involving Conflicts of Interest Between Research and Investment Banking
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summary

Citigroup Global Markets Inc. (f/k/a Salomon Smith Barney) agreed to a $2.7 billion SEC settlement for issuing misleading buy recommendations on telecom stocks while concealing negative internal views, leading to a court-ordered Distribution Fund compensating investors who bought specified securities between November 1999 and November 2001.

paragraph

Citigroup Global Markets Inc., formerly Salomon Smith Barney, resolved SEC charges of securities fraud related to fraudulent research reports on telecom companies, agreeing to a $2.7 billion settlement as part of the 2002 Global Research Analyst Settlement. The court ordered the creation of a Distribution Fund, funded by Citigroup’s federal payment plus interest, to compensate investors who purchased eight specific telecom securities—including Focal Communications, Metromedia, Level 3, Williams, XO, Adelphia, RCN, and AT&T—during designated purchase windows between November 1999 and November 2001. The court explicitly stated that the identified securities and time periods were for administrative purposes only and did not constitute a judicial finding of fraud or liability.

narrative

Citigroup Global Markets Inc. (f/k/a Salomon Smith Barney) settled SEC charges of securities fraud stemming from its analysts’ issuance of misleading buy recommendations on telecom stocks while concealing negative internal assessments, as part of the broader 2002 Global Research Analyst Settlement totaling $2.7 billion. The court ordered the establishment of a Distribution Fund, financed by Citigroup’s federal payment and any accrued interest, to provide equitable restitution to investors who purchased specific equity securities during defined time periods between November 1999 and November 2001. The affected securities included Focal Communications Corp., Metromedia Fiber Networks, Level 3 Communications, Williams Communications Group, XO Communications, Adelphia Business Solutions, RCN Corp., and AT&T Corp., each with individually specified purchase windows. The court’s October 31, 2003 order precisely delineated these securities and timeframes solely for the administrative purpose of distributing the fund, emphasizing that the listing was not a judicial or Commission finding of fraud or liability. No criminal charges were filed; the resolution was civil and focused entirely on investor compensation. The Distribution Fund Administrator was tasked with developing a cost-effective plan to identify and reimburse Eligible Distribution Fund Recipients based on purchase records. The settlement aimed to restore investor confidence and deter future misconduct without establishing legal precedent for other cases.

Enriched metadata

Scheme
financial-fraud (100%)
Court
Southern District of New York
Classified financial-fraud(confidence 100%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 67% / precision 23%. detection rule →
Parties
Securities and Exchange CommissionCitigroup Global Markets Inc.
Keywords
distribution fundincdistributionequity securitiessecurities questionquestion relevantfundfund planfinalsecuritiesequityrelevant periodperiod purchasequestionrelevant

Extracted insights

Entities 5
  • organization Citigroup Global Markets Inc., f/k/a Salomon Smith Barney Inc.
  • organization Court
  • person final judgment
  • agency Securities and Exchange Commission
  • organization Securities and Exchange Commission
Triples 13
  • SECURITIES AND EXCHANGE COMMISSION filed against CITIGROUP GLOBAL MARKETS INC., f/k/a SALOMON SMITH BARNEY INC.
  • Final Judgment calls for creation of a Distribution Fund consisting of Defendant’s Federal Payment plus income and interest earned thereon
  • Distribution Fund Administrator shall formulate and administer a Distribution Fund Plan intended to provide equitable, cost-effective distribution to Eligible Distribution Fund Recipients
  • Eligible Distribution Fund Recipient must have purchased equity securities in question through Defendant during the relevant period of purchase
  • Court identified Focal Communications Corp. as equity security with relevant purchase period Feb. 21, 2001 – Aug. 13, 2001 (First Claim)
  • Court identified Focal Communications Corp. as equity security with relevant purchase period April 10, 2000 – Oct. 17, 2000 (Second Claim)
  • Court identified Metromedia Fiber Networks, Inc. as equity security with relevant purchase period April 30, 2001 – July 25, 2001
  • Court identified Level 3 Communications Inc. as equity security with relevant purchase period April 18, 2001 – June 18, 2001
  • Court identified Williams Communications Group Inc. as equity security with relevant purchase period May 1, 2001 – Nov. 1, 2001
  • Court identified XO Communications Inc. as equity security with relevant purchase period April 26, 2001 – Nov. 1, 2001
  • Court identified Adelphia Business Solutions Inc. as equity security with relevant purchase period May 14, 2001 – Aug. 13, 2001
  • Court identified RCN Corp. as equity security with relevant purchase period May 3, 2001 – Aug. 2, 2001
  • Court identified AT&T Corp. as equity security with relevant purchase period Nov. 29, 1999 – Jan. 25, 2000
PDF
SEC v. : 03 Civ. 2945 (WHP) · Source
Text layers
Extracted body text (3,683c) 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
________________________________________________ 
        : 
SECURITIES AND EXCHANGE COMMISSION, : 
        : 
                                                Plaintiff,                                    :            Civil            Action            No.            
        : 
                        -against-                                                            :            03            Civ.            2945            (WHP)            
        : 
CITIGROUP GLOBAL MARKETS INC.,  : 
F/K/A SALOMON SMITH BARNEY INC.,  : 
        : 
    Defendant.   : 
________________________________________________: 
 
ORDER REGARDING DISTRIBUTION FUND PLAN
 
 
 On October 31, 2003, the Court signed a Final Judgment as to Defendant Citigroup 
Global Markets Inc., f/k/a Salomon Smith Barney Inc. (“Final Judgment”).  Section II of the 
Final Judgment calls for the creation of a Distribution Fund, which consists of Defendant’s 
Federal Payment plus any income and interest earned thereon.
1
  Under Section V.A of the Final 
Judgment, “[t]he Distribution Fund Administrator shall formulate and administer a Distribution 
Fund Plan ... intended to provide for the equitable, cost-effective distribution of funds to Eligible 
Distribution Fund Recipients.”  Under Section V.C.1 of the Final Judgment, to be an Eligible 
Distribution Fund Recipient, a person must have purchased “equity securities in question” 
through Defendant during the “relevant period of purchase.”  Also under Section V.C.1, 
“[i]dentification of the ‘equity securities in question’ and the ‘relevant period of purchase’ for 
each such equity security will be set forth (solely for the purpose of administering the 
Distribution Fund Plan) in a further order of the Court.” 
                                                
 
1
 All defined terms in the Final Judgment apply to this Order. 

 Accordingly, IT IS HEREBY ORDERED that the “equity securities in question” and the 
“relevant period of purchase” for each such equity security, as those terms are used in Section 
V.C.1 of the Final Judgment, are as follows: 
 
Equity Securities in Question   Relevant Periods of Purchase  
 Focal Communications Corp.   Feb. 21, 2001 – Aug. 13, 2001 
    (re First Claim for Relief) 
 Focal Communications Corp.   April 10, 2000 – Oct. 17, 2000 
    (re Second Claim for Relief) 
 Metromedia Fiber Networks, Inc.  April 30, 2001 – July 25, 2001 
 Level 3 Communications Inc.   April 18, 2001 – June 18, 2001 
 Williams Communications Group Inc. May 1, 2001 – Nov. 1, 2001 
 XO Communications Inc.   April 26, 2001 – Nov. 1, 2001 
 Adelphia Business Solutions Inc.  May 14, 2001 – Aug. 13, 2001 
 RCN Corp.     May 3, 2001 – Aug. 2, 2001 
 AT&T Corp.     Nov. 29, 1999 – Jan. 25, 2000 
 
The identification of “equity securities in question” and “relevant periods of purchase” made 
herein is solely for the purpose of facilitating the efficient administration of the Distribution 
Fund Plan, is not a judicial or Commission finding, and is not intended to have precedential 
effect in other actions.  
            SO            ORDERED.            
 
Dated: New York, New York 
            October            31,            2003            
 
 
                                                                        ________________________________            
                                                                        WILLIAM            H.            PAULEY            III            
                                                                        UNITED            STATES            DISTRICT            JUDGE            
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OCR text (3,069c · tika · 95% conf) 
UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
________________________________________________ 
        : 
SECURITIES AND EXCHANGE COMMISSION, : 
        : 
    Plaintiff,   : Civil Action No. 
        : 
  -against-     : 03 Civ. 2945 (WHP) 
        : 
CITIGROUP GLOBAL MARKETS INC.,  : 
F/K/A SALOMON SMITH BARNEY INC.,  : 
        : 
    Defendant.   : 
________________________________________________: 
 

ORDER REGARDING DISTRIBUTION FUND PLAN 
 
 On October 31, 2003, the Court signed a Final Judgment as to Defendant Citigroup 

Global Markets Inc., f/k/a Salomon Smith Barney Inc. (“Final Judgment”).  Section II of the 

Final Judgment calls for the creation of a Distribution Fund, which consists of Defendant’s 

Federal Payment plus any income and interest earned thereon.1  Under Section V.A of the Final 

Judgment, “[t]he Distribution Fund Administrator shall formulate and administer a Distribution 

Fund Plan … intended to provide for the equitable, cost-effective distribution of funds to Eligible 

Distribution Fund Recipients.”  Under Section V.C.1 of the Final Judgment, to be an Eligible 

Distribution Fund Recipient, a person must have purchased “equity securities in question” 

through Defendant during the “relevant period of purchase.”  Also under Section V.C.1, 

“[i]dentification of the ‘equity securities in question’ and the ‘relevant period of purchase’ for 

each such equity security will be set forth (solely for the purpose of administering the 

Distribution Fund Plan) in a further order of the Court.” 

                                                 
1 All defined terms in the Final Judgment apply to this Order. 



 Accordingly, IT IS HEREBY ORDERED that the “equity securities in question” and the 

“relevant period of purchase” for each such equity security, as those terms are used in Section 

V.C.1 of the Final Judgment, are as follows: 

 Equity Securities in Question   Relevant Periods of Purchase  
 Focal Communications Corp.   Feb. 21, 2001 – Aug. 13, 2001 
    (re First Claim for Relief) 
 Focal Communications Corp.   April 10, 2000 – Oct. 17, 2000 
    (re Second Claim for Relief) 
 Metromedia Fiber Networks, Inc.  April 30, 2001 – July 25, 2001 
 Level 3 Communications Inc.   April 18, 2001 – June 18, 2001 
 Williams Communications Group Inc. May 1, 2001 – Nov. 1, 2001 
 XO Communications Inc.   April 26, 2001 – Nov. 1, 2001 
 Adelphia Business Solutions Inc.  May 14, 2001 – Aug. 13, 2001 
 RCN Corp.     May 3, 2001 – Aug. 2, 2001 
 AT&T Corp.     Nov. 29, 1999 – Jan. 25, 2000 
 
The identification of “equity securities in question” and “relevant periods of purchase” made 

herein is solely for the purpose of facilitating the efficient administration of the Distribution 

Fund Plan, is not a judicial or Commission finding, and is not intended to have precedential 

effect in other actions.  

 SO ORDERED. 

 
Dated: New York, New York 
 October 31, 2003 
 
 
      ________________________________ 
      WILLIAM H. PAULEY III 
      UNITED STATES DISTRICT JUDGE 

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