New York Attorney General Eliot Spitzer is keeping a close eye on an arbitration case involving a former Citigroup ( C) stockbroker whose whistleblowing helped shape a congressional investigation into bubble-era initial public offerings.

Spitzer is seeking daily transcripts from the securities industry arbitration proceeding, which involves a $100 million wrongful termination claim filed by former Citigroup broker David Chacon. Spitzer's office requested the transcripts in a June 17 letter to the arbitrators. Sources say the unusual request is likely to be granted.

Chacon, who was dismissed three years ago, contends Citigroup fired him after he complained about the bank's former practice of awarding shares in hot initial public offerings to favored executives, including those at WorldCom and other telecom companies. He also claims he was a victim of racial discrimination.

Chacon's allegations about insider IPO allocations, a practice called "spinning" on Wall Street, led to a congressional investigation during the summer of 2002, when corporate scandals roiled the stock market. Chacon's claims also formed the basis of a civil lawsuit filed by Spitzer against several telecom executives who received shares in hot IPOs from Citigroup.

Behind the scenes, Chacon also worked with Spitzer's office in its investigation of other tawdry investment banking practices at Citigroup. The bank ultimately paid a $400 million penalty to settle allegations that its research analysts, most notably former telecom guru Jack Grubman, had issued biased and tainted stock recommendations in an effort to secure investment banking deals.

Spitzer's settlement with Citigroup was the centerpiece of the $1.4 billion global settlement hammered out in April 2003 by Spitzer and other securities regulators with 10 Wall Street firms.

The Chacon arbitration, which is occurring behind closed doors in Chicago, is expected to touch on many of the issues covered by the Citigroup settlement. One of the first witnesses that Chacon's attorney, Jeffrey Liddle, intends to call is Michael Carpenter, the former head of Citigroup's investment banking division and a former director of the New York Stock Exchange.

Citigroup ousted Carpenter in September 2002, as Spitzer's office began turning up the heat on the bank. A month later, Carpenter resigned from the NYSE.

It's not known what Spitzer's interest in the arbitration proceeding is. His office declined to comment. In the June 17 letter, a copy of which was provided to TheStreet.com, New York Assistant Attorney General Patricia Cheng said the "subjects to be covered at the hearing are of interest to this office."

A Citigroup spokeswoman could not be reached for a comment.

Legal experts say it's not unusual for prosecutors to monitor the outcome of private litigation for possible investigative leads, or to determine if a company has complied with the terms of a settlement. But it's rare for prosecutors to seek transcripts from an arbitration while the proceedings are taking place.

In fact, Spitzer's office had wanted to send an attorney to sit in on the hearing, but the arbitrators denied that request.

"The request itself is uncommon," says Derek Meisner, an attorney with Kirkpatrick & Lockhart and former SEC branch manager. "I'm not familiar with a regulator doing that."

Meisner speculates Spitzer may be trying to gather evidence on past investment banking practices at Citigroup that were not covered by the terms of the global settlement.

Chacon, meanwhile, has become something of a whistleblowing gadfly since his complaint became public two years ago. The 33-year-old Chacon, who voluntarily resigned from Credit Suisse First Boston due to the publicity over the lawsuit, now runs a nonprofit group that advises other corporate whistleblowers.

Chacon's Employment Security Agency helps whistleblowers find legal representation and find new employment. Some of his initial clients include a group of BNP Paribas employees, who have alleged that the French bank's New York distressed-debt group may have engaged improper practices. The New York Times reported in April that the Manhattan district attorney's office is investigating the bank.