WASHINGTON - John Gutfreund, former chairman and chief executive officer at Salomon Brothers, has agreed to pay a $100,000 fine to settle charges in connection with illegal trading in the government bond market, the Securities and Exchange Commission announced yesterday,
Gutfreund will also be barred for life from acting as chairman or chief executive officer of any brokerage firm or investment company as part of the settlement, the agency said.
Former Salomon President Thomas Strauss, who was also charged in the case agreed to pay a $75,000 fine and to be suspended from associating with any securities firm for six months. Former Vice Chairman John Meriwether agreed to pay a $75,000 fine and to stay out of the securities business for three months.
The settlement came one day after the commission sued two former managing directors at Salomon, Paul Mozer and Thomas Murphy, for submitting false bids totaling over $15 billion in the government bond market from 1989 to 1991.
The SEC said Gutfreund did not participate in the false bids, but that he and Strauss and Meriwether failed to investigate promptly after learning in April 1991 from the firm's counsel of two false customer bids submitted by Mozer at a three-year note auction. The false bids of $3.15 billion each. along with one made by Salomon on its own account, enabled the firm to capture over $5.1 billion of a three-year note sale totaling $9 billion.
The officers also delayed reporting the violation to government authorities, which was followed by other auction rule violations, the SEC said yesterday in announcing the settlement.
"This has been, and continues to be, a very sad case," SEC Chairman Richard Breeden said yesterday in a speech to the Securities Industry Association in Boca Raton, Fla. "A very large and successful securities firm was nearly pushed out of existence because of serious wrongdoing by two senior members of the firm."
