Phil Anschutz, the founder and former chairman of Qwest Communications International Inc., will give $4.4 million to law schools and not-for-profit groups as part of an agreement with New York Attorney General Eliot Spitzer to conclude allegations the billionaire received hot initial public shares in exchange for banking business.
The agreement marks the first time an executive has relinquished profits linked to the controversial practice known as IPO spinning, according to the New York Attorney General.
Without admitting or denying the allegations, Anschutz has agreed to contribute the sum of money, “which is roughly equal to his IPO profits,” according to a press release Spitzer issued.
Anschutz is worth $4.9 billion, according to Forbes Magazine.
In September 2002, Spitzer filed a complaint against Anschutz and four other officers of telecommunications companies, alleging they received millions of dollars in hot IPO offerings from the Salomon Smith Barney division of Citigroup “as an inducement or reward for investment banking business.”
The Associated Press quoted Anschutz spokesman Jim Monaghan as saying, “We never steered Qwest investment banking business to Salomon Smith Barney nor to any other investment banker in exchange for IPOs. Mr. Anschutz did not personally receive nor review IPO opportunities, as they were handled by our portfolio managers.”
Other people named in Spitzer’s complaint include: former WorldCom CEO Bernard J. Ebbers, Metromedia Fiber Networks Chairman Stephen A. Garofalo, former McLeod USA CEO Clark E. McLeod and former Qwest CEO Joseph P. Nacchio.
The complaint filed against these executives is continuing, according to the New York Attorney General.
It also alleges Anschutz and the other officers failed to disclose that Salomon had issued such shares, a violation of the Martin Act, New York’s securities law.
The complaint is part of state and federal regulators’ numerous probes designed to expose and curtail the unethical practices of Wall Street firms during the heyday of the Internet and telecommunications boon.
In April state and federal regulators concluded a $1.4 billion settlement agreement with 10 investment firms. The firms are charged with misleading investors with tainted research.
Jack Grubman, the former star analyst at Salomon Smith Barney, is permanently barred from the securities industry and will pay $15 million to settle the charges against him, regulators said.
Regulators also said Salomon and Credit Suisse First Boston participated in IPO spinning.
