It took a congressional subpoena and weeks of negative headlines, but Citigroup ( C) finally has
admitted doling out thousands of shares of hot initial public offerings to executives at WorldCom. But it's not so much the revelation about the IPO wheeling-and-dealing that comes as a shock. What's most surprising is that it took Citigroup nearly two months to come clean on an issue that has dogged other Wall Street investment banks and that many had long suspected of being true at Citigroup's own Salomon Smith Barney division. "It's nothing new," says David Menlow, president of IPO Financial Network, a new stock offering research service. "If there were to be an investigation it would involve every single firm on Wall Street." In a letter delivered late Monday to the House committee, Citigroup revealed that since 1997 the average IPO allocation to former WorldCom CEO Bernard Ebbers and former CFO Scott Sullivan totaled 6,409 shares. But before then, the nation's largest financial services company said it wasn't uncommon for WorldCom executives and others to get as much as 101,500 shares in some hot IPOs. Citigroup points out that those much larger allocations took place before its merger with Salomon Brothers, which at the time was one of Wall Street's biggest bond-trading firms. But the sheer size of those IPO allocations, which Citigroup says may have generated an average first-day trading gain of nearly $600,000 for each of those executives, is sure to spark additional questions about the stated, or hidden, purpose of such seeming corporate largesse.