Metromedia Exec Settles IPO Spinning Charge - TheStreet

Metromedia Exec Settles IPO Spinning Charge

Steve Garofalo will pay $1.5 million to settle a case brought by Eliot Spitzer.
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A third telecom executive settled IPO favoritism charges brought by New York's attorney general.

Former

Metromedia Fiber Network

CEO Steve Garofalo agreed Thursday to pay $1.5 million to settle allegations that he unfairly profited from initial public offering handouts brandished by bankers eager to win lucrative investment banking business.

The failed telco's former chief is expected to give $1.1 million to the Litigation Trust Fund, an organization set up to help shareholders recoup their investment losses, and to split $400,000 between the Cardozo School of Law and the Touro Law Center, two New York-area schools.

Garofalo is one of five telco honchos named in Attorney General Eliot Spitzer's allegations on so-called IPO spinning. Former

Qwest

(Q)

chief Joe Nacchio

agreed in October to give $400,000 to two New York law schools to settle spinning allegations.

In May, Nacchio's former boss, Qwest founder Phil Anschutz,

settled with Spitzer's office by agreeing to make a $4.4 million donation to charity.

Garofalo, Nacchio, Anschutz, former

WorldCom

chief Bernie Ebbers and

McLeodUSA

(MCLD)

founder Clark McLeod were accused of receiving millions of dollars' worth of lucrative IPO shares in exchange for banking business during the heady late-1990s telecom boom.

Spinning refers to the underwriting practice of distributing shares in red-hot initial public offerings to select executives as a favor. In this case the underwriter was the Salomon Smith Barney investment banking division of

Citigroup

(C) - Get Report

, whose telecom coverage was spearheaded by analyst Jack Grubman.