Jack Grubman, the Citigroup ( C) Salomon Smith Barney telecom analyst who became the poster boy for Wall Street conflicts of interest, is out of a job, leaving Citigroup by "mutual agreement." But Grubman's departure will not quiet the debate over whether he and other Salomon executives stepped over the line in the firm's zeal to become the telecommunication industry's preferred investment banker. Investigations by the New York State Attorney General's Office and the National Association of Securities Dealers into Grubman's close ties to many of the telecom companies he followed -- in particular, fallen telecom giant WorldCom -- will continue. And new questions are sure to arise about the reported $30 million severance deal Grubman is taking with him.
Citigroup has acknowledged that Grubman attended more than a dozen corporate board meetings for some of the companies he covered, including WorldCom. It also acknowledged that Grubman offered advice in some mergers those companies were doing. Grubman even served as an official proxy solicitor in WorldCom's heated battle to buy MCI Communications -- the deal that turned the small long-distance carrier into a major player. In some respects, Grubman's resignation is no surprise. Following his contentious testimony last month before a congressional panel looking into the collapse of WorldCom, Grubman had become a lightning rod for bad publicity. It also didn't help that most of the telecom stocks he had touted for so long to investors -- stocks like WorldCom, Global Crossing and Winstar -- have gone bust. Last week Citigroup indicated just how far Grubman's star had fallen at the firm in a letter to Rep. Michael Oxley (R., Ohio), the chairman of the committee looking into the WorldCom collapse and allegations that Salomon may have given some WorldCom executives an inside track to profit on some hot initial public offerings. Citigroup attorney Jane Sherburne said Grubman's annual compensation package, which at one time totaled $20 million a year, had been slashed in recent years because of "his poor performance in picking stocks."