An uneasy, pins-and-needles mood hung over the cavernous equity syndicate area at

Salomon Smith Barney

following the pricing earlier this month of a large secondary offering for

Level 3 Communications



Though the deal -- at $1.3 billion, the largest secondary ever priced for a


company -- went well, a weeklong clash between lead banker Frank Maturo and a group of sales management executives boiled over on the day the deal went to market.

Several days later, Maturo, a 15-year veteran of the equity desk, was fired.

That Maturo's was the head that rolled resulted primarily from a continuing turf war between pros from Smith Barney and Salomon Brothers, according to four former Salomon insiders familiar with the situation. Maturo was a Solly guy; the sales honchos were from Smith Barney. (The firms merged in 1997 as


acquired Salomon.)

"It was inevitable that Frank would be the one to go," says one insider who witnessed the turmoil. "This Salomon vs. Smith Barney clash still goes on."

Maturo's dismissal is the most recent evidence that the co-mingling of Salomon's bare-knuckle trading house with Smith Barney's more genteel investment banking and high-end retail businesses hasn't completely bridged the cultural chasm that still has many employees working like Jets among Sharks. "He's Salomon" was the shorthand explanation some company insiders gave for Maturo's firing. Others explain away the tumultuous situation, saying, "Frank had trouble with the Smith Barney way."

Reached while on vacation in New Zealand, Maturo declined to comment on the situation, saying he was still negotiating his severance package.

A year-and-a-half since the merger of the two investment banks and about a year since they were brought under the


(C) - Get Report

umbrella, it seems a lot of Salomon veterans are having trouble with the Smith Barney way.

Earlier this year, John Barber, a longtime Smith Barney equity pro, made a bid to become the equity group's second in command, says the insider. The bid was rejected after several Salomon bankers objected to having so many Smith Barney people in the top spots. "All the Solly guys were ready to walk," he adds. Barber simply says, "I think all the talk about Salomon vs. Smith Barney is overstated."

This wasn't supposed to happen. Citigroup co-Chief Executive

Sandy Weill

and his lieutenants have merged many a brokerage firm into their fold, often saving their prey from rocky financial times.

The Solly-Smith Barney deal was going to combine Solly's trading prowess with Smith Barney's 10,000-broker sales force and deal makers to form an operation whose value would exceed the sum of its parts. However, many veteran Salomon bankers, feeling slighted in the merger, quit, and the bank's performance in equity underwriting began to slide.

Last year, Salomon Smith Barney was the only investment bank among the top five underwriters of common stock to lose market share to its rivals, according to

Securities Data


Still, many top execs at the firm bristle at the perception of tribal warfare within the firm. "Frank

Maturo is a talented professional," says Jim Cowles, Salomon Smith Barney's head of equity capital markets. "His departure was not a Salomon vs. Smith Barney thing." Cowles, in the parlance of the firm, is Smith Barney.

Excessive Vigor

Other insiders concede Maturo was a hothead at times, bringing to the equity desk the same intensity he showed as a basketball standout at


. "He showed a vigor that some might find excessive," another insider says.

The fact that the firm was willing to sacrifice Maturo in the name of team harmony indicates how seriously the top execs were taking this blowup. Maturo is a veteran of the equity syndicate side for more than a decade at Salomon Brothers and was the point man on several of the firm's largest and most profitable deals since the merger.

In just the Level 3 deal and another equity offering for



earlier this year, Salomon Smith Barney took in about $30 million in fees. Maturo led both deals.

"He is known for creating a personal relationship with the management of the companies he is working with," says one former co-worker now at another firm who requested anonymity.

In fact, it may have been Maturo's tight-fisted control that led to the clash with the sales team on the recent deal, says another Salomon Smith Barney insider who witnessed the unfolding conflict. Maturo and the sales managers "were fighting the whole way," he says.

Much of that conflict centered on the minutiae of the deal, such as whom the issuer would see on the road show, how to position large institutional orders for the stock and how much to sell to international buyers, the insider explains. These minor though important details are usually worked out between banker and issuer without the involvement of salesmen, he adds.

Several times the situation degenerated into a yelling match between Maturo and the sales managers. "It was clear that Frank didn't want to have the sales management group second-guessing him, and the sales group didn't like how Frank was strong-arming them," he says.

The conflict was put aside until the deal was completed on March 3, a Wednesday. In the two days that followed, meetings took place at the top of the equity food chain between Cowles, the equity capital markets chief, and his two bosses, Arthur Hyde (Salomon) and Bob DiFazio (Smith Barney), co-heads of global equities. "They were trying to determine how to handle what happened," the insider says.

When Maturo returned from the weekend, it was clear a decision had been made by the equity top dogs, spurred on by the still-smoldering Smith Barney sales managers. After Maturo had several meetings with Cowles and Hyde, he was pushed to resign. He refused and was fired. Hyde didn't return several phone calls.

Holding out to be fired was, however, a profitable strategy on Maturo's part. Employees who are laid off or fired retain a portion of the stock they have received as part of their compensation. They receive those shares at a 20% discount to market price as part of their annual pay package. The shares are put in a restricted account and reach full value, or vest, over a three-year period.

Had Maturo walked out, like so many other investment bankers at Salomon since the merger, he would have lost some or even all of his nonvested shares.

"I guess it pays to be a bad boy," says one former Salomon analyst who left the firm on his own. "You can get fired and get all your money on top of it."

The difference in pocket change between getting fired and quitting for Maturo was around $1 million, several people estimated. Maturo is still negotiating for additional compensation.

Undoubtedly, Maturo will end up somewhere else on Wall Street and most likely will eventually face off against the very people who dumped him. So Salomon Smith Barney may yet feel another shot from those sharp elbows.