Magazine article Newsweek

Hosing Down Wall Street; Lawyer Jeff Liddle Finds the Dirt on Big Financial Firms. His Latest Case Will Give Them Fresh Reasons to Hate Him

Magazine article Newsweek

Hosing Down Wall Street; Lawyer Jeff Liddle Finds the Dirt on Big Financial Firms. His Latest Case Will Give Them Fresh Reasons to Hate Him

Article excerpt

Byline: Charles Gasparino

Jeff Liddle likes to brag about some of the big names he's cross-examined during his 27-year career as an attorney on Wall Street, including Citigroup chairman Sandy Weill and Jack Grubman, the former star telecom analyst who became the poster boy for biased stock research. His favorite story, though, is about the time he turned the screws on a brokerage firm's general counsel for eight grueling days. She also happened to be his ex-wife. "The irony is that one of the arbitrators told me I was exceedingly polite," Liddle says. His ex-wife doesn't see it that way. "It gives you some insight into his character," says Margaret Grieve, now a lawyer with Bank of America. "It's a very, very sad fact that he considers that the high point of his career."

But Liddle, 55, has many high points in his career, and they've earned him a rep as one of the meanest and toughest lawyers on Wall Street. His Manhattan firm, Liddle & Robinson, with about 20 attorneys, has built a track record of squeezing multimillion-dollar settlements out of big firms for clients that typically include aggrieved former employees and angry investors. Liddle is intimidating, and not just because of his broad shoulders and passing resemblance to Mr. Clean. His past victories include a record $25 million award in punitive damages for a broker who sued his former firm (it was overturned on appeal and is being retried).

He starts presenting evidence this week in what could be his biggest case yet. His target: Citigroup, which he's suing for $100 million on behalf of David Chacon, a former Citigroup broker who blew the whistle on its practice of "spinning," or awarding shares of hot initial public offerings to favored clients. Among other things, Liddle is scrutinizing Citigroup's relationship with scandal-battered WorldCom (the company was given favorable research coverage by Grubman, who worked for Citigroup's Salomon Smith Barney division, and handled banking deals at the same time he was promoting companies through his supposedly independent research). Liddle's evidence, some of which he shared publicly for the first time with NEWSWEEK, offers new insights on just how blurred the lines may have been between banking and research.

Conflicts among research analysts have long been a sore point for Wall Street. Regulators crafted a "global settlement" in 2002 that included Citigroup and other firms for misleading investors. But Liddle's not after the kind of major structural reforms won by regulators. He's after money. Liddle maintains his clients are still owed millions, based on the evidence he's unearthed. "It's easy to point the finger at Grubman because of all his bulls--t research," Liddle says. "But he's also taking the heat for a lot of people." Even other lawyers say Liddle's opponents typically have cause to be worried. David Robbins, who's familiar with many of Liddle's cases, says: "The big firms won't admit it, but they're scared to death of him."

Liddle's evidence includes:

A memo in which Grubman's bosses gave special permission for his wife to open a brokerage account outside the firm (firms generally prohibit this because they want to monitor trades of executives with potential inside information on stocks). Grubman said he didn't invest in stocks he covered, which would have been a conflict of interest. But under cross-examination by Liddle, Grubman recently conceded his wife did own shares of WorldCom and other telecom stocks, and sold them in the fall of 2001 even as Grubman was touting them to investors. Grubman and Citigroup declined to comment, but did not dispute the existence of these and other memos. …

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