The investment banking arm of Citigroup Inc. was ordered last week by an arbitration panel to pay for the losses of a former WorldCom employee, the Wall Street Journal reported on Wednesday.
According to the Journal, a three-person National Association of Securities Dealers panel said last week that Citigroup’s Salomon Smith Barney unit -- since renamed Citigroup Global Markets -- breached its fiduciary duty to the WorldCom employee because of the unit’s close relationship with the troubled telecommunications company’s top executives.
Salomon Smith Barney also administered WorldCom’s stock-option program, the report said.
Though the panel ruled that Salomon’s actions were within the boundaries of the law, it ordered Citigroup to pay Linda Naples, a 17-year veteran of WorldCom, $75,000 of her $600,000 claim against the firm, the newspaper added.
“Salomon Smith Barney’s continuing pursuit of its own interests, without any regard to the contrary interests of those for which (Salomon) owes its fiduciary duty, leads this panel to find that such conflict directly caused the plaintiff’s damages,” the Journal said, quoting the panel’s eight page ruling.
WorldCom -- now known as MCI Inc. -- was at the center of a massive $11 billion accounting scandal before seeking bankruptcy protection. Its former chief executive, Bernie Ebbers, is expected to be tried in connection with those charges on January 17.
Representatives for Citigroup and the NASD were not immediately available for comment.
