SEC v. Jack Benjamin Grubman, Southern District of New York (Apr. 28, 2003) — Judgment

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
________________________________________________ 
        : 
SECURITIES AND EXCHANGE COMMISSION, : 
        : 
                                                Plaintiff,                                    :            Civil            Action            No.            
        : 
                        -against-                                                            :            03            Civ.            2938            (WHP)            
        : 
JACK            BENJAMIN            GRUBMAN,                                                :            
        : 
    Defendant.   : 
________________________________________________: 
 
FINAL JUDGMENT AS TO DEFENDANT 
JACK BENJAMIN GRUBMAN
 
 
 Plaintiff Securities and Exchange Commission (“Commission”) having filed a Complaint 
in this action (“Complaint”) and Defendant Jack Benjamin Grubman (“Defendant”), having 
(a) entered a general appearance, (b) consented to the Court’s jurisdiction over Defendant and 
the subject matter of this action, (c) consented to entry of this Final Judgment without admitting 
or denying the allegations of the Complaint (except as to jurisdiction), (d) waived findings of fact 
and conclusions of law, and (e) waived any right to appeal from this Final Judgment: 
I. 
Injunctive Relief 
 IT IS HEREBY ORDERED, ADJUDGED AND DECREED that: 
A.  Defendant, his agents, servants, employees, attorneys, and all persons in active 
concert or participation with them who receive actual notice of this Final Judgment by personal 
service or otherwise, are permanently restrained and enjoined from aiding and abetting violations 
of Section 15(c) of the Exchange Act and Rule 15c1-2 promulgated thereunder [15 U.S.C. 
§ 78o(c) and 17 C.F.R. § 240.15c1-2] by making use of the mails or any means or 

instrumentality of interstate commerce to effect any transaction in, or to induce or attempt to 
induce the purchase or sale of, any security by means of any act, practice, or course of business 
which operates or would operate as a fraud or deceit upon any person. 
B. Defendant, his agents, servants, employees, attorneys, and all persons in active 
concert or participation with them who receive actual notice of this Final Judgment by personal 
service or otherwise, are permanently restrained and enjoined from violating Rule 2110 of the 
Conduct Rules of NASD Inc. (“NASD”) and Rules 401 and 476 of the New York Stock 
Exchange, Inc. (“NYSE”), by publishing research reports that are contrary to his beliefs and fail 
to disclose that fact, do not provide a sound basis for evaluating facts, are not properly balanced, 
and/or contain exaggerated or unwarranted claims and/or opinions for which there is no 
reasonable basis. 
C. Defendant, his agents, servants, employees, attorneys, and all persons in active 
concert or participation with them who receive actual notice of this Final Judgment by personal 
service or otherwise, are permanently restrained and enjoined from violating NASD Rule 2210 
and NYSE Rule 472 by issuing communications to the public that are contrary to his beliefs and 
fail to disclose that fact, do not provide a sound basis for evaluating facts, are not properly 
balanced, and/or contain exaggerated or unwarranted claims and/or opinions for which there is 
no reasonable basis. 
II. 
Monetary Sanctions 
 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that:  
 A. As a result of the violations alleged in the Complaint, Defendant shall pay a total 
amount of $15,000,000, which amount includes: 
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1. $7,500,000, as a penalty; and 
2. $7,500,000, as disgorgement of bonuses and other monies. 
 B. The amount of $15,000,000, which is the sum of the penalty of $7,500,000 and 
disgorgement of $7,500,000, consists of (1) $7,500,000 in connection with the resolution of this 
action and related proceedings instituted by NASD and NYSE (the “Federal Payment”); and (2) 
$7,500,000 that Defendant has agreed to pay in connection with the resolution of a related 
proceeding by the Office of the New York Attorney General (the Defendant’s settlement with the 
Office of the New York Attorney General hereinafter shall be called the “N.Y. State 
Settlement”).  Defendant shall pay $5,000,000 of the Federal Payment by wire transfer within 90 
business days of the entry of this Final Judgment and the remaining $2,500,000 of the Federal 
Payment by wire transfer by December 31, 2003 into an interest bearing account with the Federal 
Reserve Bank of New York (“FRB-NY”) in accordance with instructions to be provided to 
Defendant by the FRB-NY and authorized or ordered by the Court.  Defendant shall 
simultaneously transmit proof of his payments to the Court, the Clerk of the Court, and the 
Commission’s counsel in this action.  These payments shall be deposited into the same interest 
bearing Distribution Fund Account that shall be established for payments from Citigroup Global 
Markets Inc., formerly known as Salomon Smith Barney Inc. (“CGM”), in connection with the 
civil action styled SEC v. Citigroup Global Markets Inc., f/k/a Salomon Smith Barney Inc., No. 
03 Civ. 2945 (WHP) (S.D.N.Y.) (“CGM Action”).  By making these payments, Defendant 
relinquishes all legal and equitable right, title, and interest in such funds, and no part of the funds 
shall be returned to Defendant.  These funds, together with any interest and income earned 
thereon (collectively, the “Distribution Fund”), shall be held by the FRB-NY until further order 
of the Court.  In the event that any portion of the penalty described in Section II.A.1 above is 
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remitted for deposit into the Distribution Fund, such penalty amount shall be added to the 
Distribution Fund and distributed pursuant to the Fair Funds provisions in Section 308 of the 
Sarbanes-Oxley Act of 2002 and any further order of the Court; provided, however, that the full 
penalty amount and such portion shall still be considered a penalty for tax and any other 
purposes.  Pending further order of the Court, in accordance with the letter dated August 26, 
2003 from the Director of the Administrative Office of the United States Courts to the 
Commission’s counsel in connection with this action, the court registry fund fee pursuant to 28 
U.S.C. § 1914 for the Distribution Fund shall be four (4) percent of the income earned on the 
Distribution Fund.  The Distribution Fund shall be managed in accordance with the terms of the 
Final Judgment entered in the CGM Action, and shall be distributed pursuant to the Final 
Judgment in the CGM Action. 
 C. Defendant’s obligation to make the Federal Payment is not contingent on or 
dependent in any way or part on the N.Y. State Settlement or on Defendant’s payment(s) to the 
Office of the New York Attorney General pursuant to the N.Y. State Settlement, and the total 
amount of the Federal Payment shall not be affected by the N.Y. State Settlement and shall 
remain at $7,500,000.  The total amount of penalties paid (1) in the Federal Payment (“P
Fed
”) and 
(2) pursuant to the N.Y. State Settlement (“P
State
”) shall at all times equal the total amount of 
disgorgement paid (3) in the Federal Payment (“D
Fed
”) and (4) pursuant to the N.Y. State 
Settlement (“D
State
”).  Insofar as any amount paid to the Office of the New York Attorney 
General pursuant to the N.Y. State Settlement is deemed a penalty, the amount of the Federal 
Payment that is deemed a penalty shall be adjusted so that P
Fed
 + P
State
 = D
Fed
 + D
State
. 
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III. 
Standing
 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, notwithstanding any 
rule or provision of law, nothing herein shall be deemed to confer standing or right of 
intervention upon any persons other than the Commission, Defendant, CGM, and the 
Distribution Fund Administrator. 
IV. 
Record Retention and Non-Destruction Requirement 
 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, for a period of five 
years from the effective date of this Final Judgment or such shorter or longer period as the Court 
may order, Defendant, and his agents, affiliates, servants, employees, attorneys, and those 
persons in active concert or participation with them, and each of them, are hereby enjoined from 
destroying, mutilating, concealing, altering, or disposing of (a) any research distributed by 
Defendant or CGM during the relevant period identified in the Complaint; (b) documents 
sufficient to identify all customers who bought or sold equity securities of the issuers as to which 
Defendant issued research during the relevant period identified in the Complaint (the 
“Transactions”), including but not limited to documents sufficient to identify the dates, amounts, 
and prices of the Transactions; (c) documents sufficient to identify which customers received 
which research distributed by Defendant during the relevant period identified in the Complaint; 
(d) order entry information sufficient to identify whether the Transactions were solicited by 
Defendant or CGM; (e) documents sufficient to identify the publicly-traded companies for which 
CGM sought to provide, was engaged to provide, or did provide investment banking services 
during the relevant period identified in the Complaint; and (f) any and all written (including 
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electronic) communication, including communications to and from customers and intra-firm 
communications, relating to CGM’s investment banking and equity research operations during 
the relevant period identified in the Complaint; provided, however, that Defendant need not 
retain duplicate identical copies of public documents filed with the Commission or any other 
regulatory authority. 
V. 
Defendant’s Consent Incorporated by Reference 
 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant’s Consent 
previously filed in this action is incorporated herein with the same force and effect as if fully set 
forth herein, and Defendant shall comply with all of the undertakings and agreements set forth 
therein. 
VI. 
Court to Retain Jurisdiction
 
 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this Court shall retain 
jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment. 
VII. 
Entry of Judgment Forthwith
 
 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, there being no just 
cause for delay, the Clerk of the Court shall enter this Judgment forthwith and without further 
notice. 
 
Dated: New York, New York 
            ______________,            2003            
                                                                        ____________________________________            
                                                                        WILLIAM            H.            PAULEY            III            
                                                                        UNITED            STATES            DISTRICT            JUDGE            
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UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
________________________________________________ 
        : 
SECURITIES AND EXCHANGE COMMISSION, : 
        : 
    Plaintiff,   : Civil Action No. 
        : 
  -against-     : 03 Civ. 2938 (WHP) 
        : 
JACK BENJAMIN GRUBMAN,    : 
        : 
    Defendant.   : 
________________________________________________: 
 

FINAL JUDGMENT AS TO DEFENDANT 
JACK BENJAMIN GRUBMAN 

 
 Plaintiff Securities and Exchange Commission (“Commission”) having filed a Complaint 

in this action (“Complaint”) and Defendant Jack Benjamin Grubman (“Defendant”), having 

(a) entered a general appearance, (b) consented to the Court’s jurisdiction over Defendant and 

the subject matter of this action, (c) consented to entry of this Final Judgment without admitting 

or denying the allegations of the Complaint (except as to jurisdiction), (d) waived findings of fact 

and conclusions of law, and (e) waived any right to appeal from this Final Judgment: 

I. 

Injunctive Relief 

 IT IS HEREBY ORDERED, ADJUDGED AND DECREED that: 

A. Defendant, his agents, servants, employees, attorneys, and all persons in active 

concert or participation with them who receive actual notice of this Final Judgment by personal 

service or otherwise, are permanently restrained and enjoined from aiding and abetting violations 

of Section 15(c) of the Exchange Act and Rule 15c1-2 promulgated thereunder [15 U.S.C. 

§ 78o(c) and 17 C.F.R. § 240.15c1-2] by making use of the mails or any means or 



instrumentality of interstate commerce to effect any transaction in, or to induce or attempt to 

induce the purchase or sale of, any security by means of any act, practice, or course of business 

which operates or would operate as a fraud or deceit upon any person. 

B. Defendant, his agents, servants, employees, attorneys, and all persons in active 

concert or participation with them who receive actual notice of this Final Judgment by personal 

service or otherwise, are permanently restrained and enjoined from violating Rule 2110 of the 

Conduct Rules of NASD Inc. (“NASD”) and Rules 401 and 476 of the New York Stock 

Exchange, Inc. (“NYSE”), by publishing research reports that are contrary to his beliefs and fail 

to disclose that fact, do not provide a sound basis for evaluating facts, are not properly balanced, 

and/or contain exaggerated or unwarranted claims and/or opinions for which there is no 

reasonable basis. 

C. Defendant, his agents, servants, employees, attorneys, and all persons in active 

concert or participation with them who receive actual notice of this Final Judgment by personal 

service or otherwise, are permanently restrained and enjoined from violating NASD Rule 2210 

and NYSE Rule 472 by issuing communications to the public that are contrary to his beliefs and 

fail to disclose that fact, do not provide a sound basis for evaluating facts, are not properly 

balanced, and/or contain exaggerated or unwarranted claims and/or opinions for which there is 

no reasonable basis. 

II. 

Monetary Sanctions 

 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that:  

 A. As a result of the violations alleged in the Complaint, Defendant shall pay a total 

amount of $15,000,000, which amount includes: 

- 2 - 



1. $7,500,000, as a penalty; and 

2. $7,500,000, as disgorgement of bonuses and other monies. 

 B. The amount of $15,000,000, which is the sum of the penalty of $7,500,000 and 

disgorgement of $7,500,000, consists of (1) $7,500,000 in connection with the resolution of this 

action and related proceedings instituted by NASD and NYSE (the “Federal Payment”); and (2) 

$7,500,000 that Defendant has agreed to pay in connection with the resolution of a related 

proceeding by the Office of the New York Attorney General (the Defendant’s settlement with the 

Office of the New York Attorney General hereinafter shall be called the “N.Y. State 

Settlement”).  Defendant shall pay $5,000,000 of the Federal Payment by wire transfer within 90 

business days of the entry of this Final Judgment and the remaining $2,500,000 of the Federal 

Payment by wire transfer by December 31, 2003 into an interest bearing account with the Federal 

Reserve Bank of New York (“FRB-NY”) in accordance with instructions to be provided to 

Defendant by the FRB-NY and authorized or ordered by the Court.  Defendant shall 

simultaneously transmit proof of his payments to the Court, the Clerk of the Court, and the 

Commission’s counsel in this action.  These payments shall be deposited into the same interest 

bearing Distribution Fund Account that shall be established for payments from Citigroup Global 

Markets Inc., formerly known as Salomon Smith Barney Inc. (“CGM”), in connection with the 

civil action styled SEC v. Citigroup Global Markets Inc., f/k/a Salomon Smith Barney Inc., No. 

03 Civ. 2945 (WHP) (S.D.N.Y.) (“CGM Action”).  By making these payments, Defendant 

relinquishes all legal and equitable right, title, and interest in such funds, and no part of the funds 

shall be returned to Defendant.  These funds, together with any interest and income earned 

thereon (collectively, the “Distribution Fund”), shall be held by the FRB-NY until further order 

of the Court.  In the event that any portion of the penalty described in Section II.A.1 above is 

- 3 - 



remitted for deposit into the Distribution Fund, such penalty amount shall be added to the 

Distribution Fund and distributed pursuant to the Fair Funds provisions in Section 308 of the 

Sarbanes-Oxley Act of 2002 and any further order of the Court; provided, however, that the full 

penalty amount and such portion shall still be considered a penalty for tax and any other 

purposes.  Pending further order of the Court, in accordance with the letter dated August 26, 

2003 from the Director of the Administrative Office of the United States Courts to the 

Commission’s counsel in connection with this action, the court registry fund fee pursuant to 28 

U.S.C. § 1914 for the Distribution Fund shall be four (4) percent of the income earned on the 

Distribution Fund.  The Distribution Fund shall be managed in accordance with the terms of the 

Final Judgment entered in the CGM Action, and shall be distributed pursuant to the Final 

Judgment in the CGM Action. 

 C. Defendant’s obligation to make the Federal Payment is not contingent on or 

dependent in any way or part on the N.Y. State Settlement or on Defendant’s payment(s) to the 

Office of the New York Attorney General pursuant to the N.Y. State Settlement, and the total 

amount of the Federal Payment shall not be affected by the N.Y. State Settlement and shall 

remain at $7,500,000.  The total amount of penalties paid (1) in the Federal Payment (“PFed”) and 

(2) pursuant to the N.Y. State Settlement (“PState”) shall at all times equal the total amount of 

disgorgement paid (3) in the Federal Payment (“DFed”) and (4) pursuant to the N.Y. State 

Settlement (“DState”).  Insofar as any amount paid to the Office of the New York Attorney 

General pursuant to the N.Y. State Settlement is deemed a penalty, the amount of the Federal 

Payment that is deemed a penalty shall be adjusted so that PFed + PState = DFed + DState. 

- 4 - 



III. 

Standing

 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, notwithstanding any 

rule or provision of law, nothing herein shall be deemed to confer standing or right of 

intervention upon any persons other than the Commission, Defendant, CGM, and the 

Distribution Fund Administrator. 

IV. 

Record Retention and Non-Destruction Requirement 

 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, for a period of five 

years from the effective date of this Final Judgment or such shorter or longer period as the Court 

may order, Defendant, and his agents, affiliates, servants, employees, attorneys, and those 

persons in active concert or participation with them, and each of them, are hereby enjoined from 

destroying, mutilating, concealing, altering, or disposing of (a) any research distributed by 

Defendant or CGM during the relevant period identified in the Complaint; (b) documents 

sufficient to identify all customers who bought or sold equity securities of the issuers as to which 

Defendant issued research during the relevant period identified in the Complaint (the 

“Transactions”), including but not limited to documents sufficient to identify the dates, amounts, 

and prices of the Transactions; (c) documents sufficient to identify which customers received 

which research distributed by Defendant during the relevant period identified in the Complaint; 

(d) order entry information sufficient to identify whether the Transactions were solicited by 

Defendant or CGM; (e) documents sufficient to identify the publicly-traded companies for which 

CGM sought to provide, was engaged to provide, or did provide investment banking services 

during the relevant period identified in the Complaint; and (f) any and all written (including 

- 5 - 



electronic) communication, including communications to and from customers and intra-firm 

communications, relating to CGM’s investment banking and equity research operations during 

the relevant period identified in the Complaint; provided, however, that Defendant need not 

retain duplicate identical copies of public documents filed with the Commission or any other 

regulatory authority. 

V. 

Defendant’s Consent Incorporated by Reference 

 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendant’s Consent 

previously filed in this action is incorporated herein with the same force and effect as if fully set 

forth herein, and Defendant shall comply with all of the undertakings and agreements set forth 

therein. 

VI. 

Court to Retain Jurisdiction 

 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that this Court shall retain 

jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment. 

VII. 

Entry of Judgment Forthwith 

 IT IS FURTHER ORDERED, ADJUDGED AND DECREED that, there being no just 

cause for delay, the Clerk of the Court shall enter this Judgment forthwith and without further 

notice. 

 
Dated: New York, New York 
 ______________, 2003 
      ____________________________________ 
      WILLIAM H. PAULEY III 
      UNITED STATES DISTRICT JUDGE 

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