Grubman, Solomon may face NASD charges

The National Association of Securities Dealers is reportedly on the verge of filing administrative charges of securities fraud against high-profile telecom analyst Jack Grubman and his former employer Solomon Smith Barney.

According to a story in The Wall Street Journal, the charges would stem from Grubman’s positive reports on Winstar Communications in early 2001. At the time evidence was mounting that the firm was in financial trouble--trouble that eventually led to Winstar declaring bankruptcy in April 2001. Despite this evidence and a falling stock price, Grubman continued to issue positive reports on the carrier.

The charges will argue that Grubman maintained his bullish stance on Winstar in order to help his firm land lucrative investment-banking business with the carrier. Grubman resigned from Solomon earlier this year amid controversy surrounding his optimistic outlook on the communications sectors.

If the charges against Grubman are proven, he could face fines, suspension or an all-out prohibition against working in the securities industry.

Representatives with the NASD and Solomon did not immediately return requests for comment. Grubman could not be reached for comment. --Toby Weber, staff writer