Updated from 3:46 p.m. EDT

Citigroup ( C) revealed Friday that Bernie Ebbers made an $11 million windfall on IPO shares he got from Citi's investment banking unit and its predecessors.

The information came as Citi and Congress locked horns in the latest round of a long-running subpoena war. On Friday, the House Financial Services Committee served its latest subpoena on Citigroup, seeking additional information about how Salomon Smith Barney doled out shares in hot initial public offerings to telecom executives it did business with.

Those execs included Ebbers, the former chief of failed telco giant WorldCom and the center of a broadening scandal on Wall Street regarding executive compensation and bubble-era business practices. Citigroup's records notably show that Ebbers took in the lion's share of his IPO gains before the company acquired the unit in its 1999 merger with Travelers.

Easing Up

Friday's subpoena sought information about the dates on which Ebbers and others were allocated shares in several IPOs underwritten by Salomon Smith Barney, which is Citi's investment banking division, and its predecessor companies, Salomon Brothers and Smith Barney. The committee also wanted more information about the prices at which the executives purchased those shares.

The subpoena was served on Citigroup early in the day and this time the bank, instead of waiting up until the deadline to respond, delivered its answer to the House panel by the afternoon. "We have received the subpoena and the committee already has received our response," says Citigroup spokeswoman Mary Ellen Hillary.

The new information comes just days after Citigroup complied with an earlier subpoena, in which the nation's biggest financial-services firm admitted it had allocated several hundred thousand shares to Ebbers over the past few years. The documents turned over by Citigroup also revealed that as many as two dozen telecom executives also may have gotten shares in hot IPOs.

Ancient History?

In its latest response, the company offers records that show most of Ebbers' IPO gains came prior to the 1997 merger of Salomon Brothers with Travelers unit Smith Barney. Of the $11 million windfall, roughly $10.5 million of that came from IPO allocations given to Ebbers by the old Salomon Brothers, which had been a major institutional trader of corporate bonds.

In the post-merger period, Ebbers netted $503,430 on shares in a dozen different IPOs, including Rhythms Netconnections, Williams Communications Group, Juno Online and United Parcel Service.

One of his biggest postmerger gains came in the late 1999 IPO for KPNQwest, a failed European telecommunications company. The documents show that Salomon allocated 20,000 shares to Ebbers at the IPO price of $20.81 on Nov. 9, 1999. He sold all that stock a week later at $39.40 a share, for a gain of $371,926.

The records show that most of Ebbers' stock sales came within a few days or weeks after the IPO. That would mean none of the stock sales technically qualified as "flipping," a practice in which a person buys and sell shares in an IPO all on the same day.

There are some clunkers in Ebbers' portfolio, too. The records show that he never sold the 35,000 shares of Williams Communications that Salomon doled out to him on Oct. 1, 1999, at $23 a share. As of Aug. 23, Ebbers was still holding the stock, handing him an unrealized loss of $804,405 in his portfolio.

Williams Communications, a spinoff of the energy company Williams Companies ( WMB), filed for bankruptcy earlier this year. The company plans to emerge to from bankruptcy on Oct. 15. Under the reorganization plan, some shareholders would be able to trade in their old shares for a lesser amount of stock in the post-bankruptcy company.


The release of the IPO information has sparked an outcry from some members of Congress for a far broader investigation into the manner in which other Wall Street firms dole out IPO shares to corporate executives.

During the bull market, it was common practice for Wall Street investment bankers to reward corporate executives with shares in new stock offerings. Critics contend the practice was a way for Wall Street firms to reward executives for directing investment banking deals to them.

Those questions dovetail with concerns in Washington and on Main Street about Wall Street's excesses during the late 1990s investment boom. A number of highly paid executives have bailed out of failing companies over the last year or so after cashing in millions of stock, leaving employees and investors holding the bag. Congressional hearings are now being held as legislators grapple with measures that would prevent officers from ignoring shareholders' long-term interests.

In light of the newest disclosures, Rep. Michael Oxley (R-Ohio), chairman of the House panel, issued a statement saying that Ebbers' IPO windfall "raises policy questions about the fairness of the process that brings new listing to the markets."