Brokers Sue Salomon Analyst Jack Grubman

Former Salomon Smith Barney brokers blame the telecom booster for losses by WorldCom employees who followed Grubman’s advice

New York – February 25, 2002 — Two Smith Barney brokers in Atlanta built up $2 billion in assets by handling the options business of WorldCom employees. When the telecom stock crashed, the customers sued for damages. Now, the brokers are fighting back. In an exclusive March cover story, Registered Rep, the No. 1 magazine for investment professionals, details how Philip Spartis and Amy Elias wound up suing Smith Barney, their former employer who, they say, settled client claims in part to protect Grubman, who brought in huge investment-banking deals from clients such as WorldCom during the telecom boom.  

According to their account in PRIMEDIA’s Registered Rep, Spartis and Elias advised clients not to over-concentrate in WorldCom and warned them about the dangers of buying WorldCom shares on margin. But, they say, Grubman’s excessive bullishness convinced their clients—including prominent WorldCom executives—to ignore their brokers’ advice. Spartis and Elias have also brought claims against Salomon Smith Barney, alleging that by settling some of the client claims the company has ruined the brokers’ careers in the brokerage business.  

PRIMEDIA’s Registered Rep was the first to break this compelling story today on its Web site www.registeredrep.com.  The full story appears in the March issue of the magazine, which will reach 92,000 investment professionals during the first week of March.

“This story is not just an account of a private dispute, but has implications for every financial advisor in the industry,” said David Geracioti, editor of PRIMEDIA’s Registered Rep.  “Spartis and Elias’ tale touches on a bunch of industry issues, one of  which is, just how much can brokers really trust their own research departments? I think brokers have had an epiphany and that is perhaps their own firms don’t have the brokers’ best interest at heart. Analysts basically were shilling for their investment banking businesses—at the expense of brokers and their clients.”

 As detailed in the Registered Rep story, current and former Worldcom employees have filed complaints against the brokers and Smith Barney with the National Association of Securities Dealers, seeking damages in the range of $35 million. When Barney began settling the complaints, rather than defending them, Spartis and Elias objected because they feared that the information on their NASD files would ruin their chances in the brokerage business.  

On February 4, 2002, Spartis and Elias received a letter signed by Smith Barney’s regional director H. Wayne Hutton, stating that the two were no longer Smith Barney employees. The brokers maintain that they were forced out largely because they wouldn’t agree to the settlements and because they feel Smith Barney is responsible for the unsuitable investments.

 For more details, visit www.registeredrep.com.  The full story will appear in the March issue of PRIMEDIA’s Registered Rep magazine.

        About PRIMEDIA’s Registered Rep

Registered Rep is the preferred magazine of retail investment professionals. Each monthly issue reaches approximately 92,000 loyal subscribers who control trillions of dollars of assets for more than 30 million investors. These powerful financial advisers are licensed to sell a broad range of investment products and rely on Registered Rep's rich portfolio of timely features, articles, departments and columns. Registered Rep is part of PRIMEDIA's Financial Services group which also includes Trusts & Estates,

National Real Estate Investor and Shopping Center World.  These are among the 90 PRIMEDIA Business Magazines and part of PRIMEDIA (NYSE: PRM), the world's largest targeted media company.

 About PRIMEDIA

PRIMEDIA is the new tradition in media. With 2000 sales of $1.7 billion from a unique combination of traditional and new media properties, it is the leading targeted content and integrated marketing solution in both the consumer and business-to-business sectors. The Company is the #1 special interest magazine publisher in the US, with more than 280 titles such as Seventeen, New York, Fly Fisherman, American Baby, Telephony, American Demographics; the #1 producer and distributor of specialty video with 18 satellite and digital video product lines, including, Channel One Network; and the #1 news and information group on the Internet, with over 1,000 special interest Web sites led by About.com. More information about the Company can be found at www.PRIMEDIA.com.

 This release contains certain forward-looking statements concerning Primedia's operations, economic performance and financial condition.   These statements are based upon a number of assumptions and estimates, which are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company, and reflect future business decisions, which are subject to change.  Some of these assumptions may not materialize, and unanticipated events will occur which can affect the Company's results.

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Contact:          Jessica Prah, 212-446-1874, jprah@sloanepr.com

                         Noelle Wojciehowski, 212-462-3658, nwojciehowski@primediabusiness.com