A probe into the integrity of Citigroup Inc.(C) 's stock research has widened to include a lucrative AT&T Corp. deal the firm's investment banking division won in 1999.

New York Attorney General Eliot Spitzer -- who has spearheaded investigations into Wall Street's research -- has requested documents from AT&T related to the initial public offering of its wireless unit, an AT&T spokeswoman said.

Spitzer is investigating Wall Street firms to see if their investment bankers pressured analysts to issue bullish stock reports to win underwriting and advisory deals. Earlier this year, he won a $100 million settlement from Merrill Lynch & Co. for its research indiscretions.

Jack Grubman, the former star telecom analyst of Citigroup's Salomon Smith Barney investment banking arm, upgraded AT&T to a "buy" in October 1999, the month before AT&T announced the wireless IPO. Salomon acted as underwriter along with Merrill and Goldman Sachs Group Inc.

Citigroup shares lost $1.18, or 3.35 percent, at $34 in trading Friday on the New York Stock Exchange, well below their 52-week high of $52.18.

Citigroup's stock is down more than 30 percent this year, as regulators and lawmakers scrutinize the financial services giant's role in the collapses of WorldCom Group and Enron Corp.

Spitzer is examining Citigroup Chief Executive Sandy Weill's role in the AT&T Wireless IPO to see if he pressured Grubman into raising his AT&T stock rating to win a role in the wireless deal, according to a report in Friday's Wall Street Journal.

Citigroup strongly denied the charges.

"Mr. Weill never told any analyst what to write and any suggestion that he did is outrageous and untrue," said a Salomon spokeswoman.

Spokespeople at Spitzer's office were not available for comment.

Regulatory sources have told Reuters that Spitzer may make an announcement regarding Grubman and Salomon within the next few weeks.


Grubman, once one of the most influential and highly paid analysts, resigned on Aug. 15 amid a sea of criticism for his dogged support of bankrupt telecom company WorldCom and other tumbling stocks.

Investigators are investigating whether Grubman doled out shares of hot stock offerings to telecom executives in return for investment banking business. He has already testified in Congressional hearings on the collapse of WorldCom, which buckled under more than $7 billion in improperly booked earnings and a mountain of debt.

Citigroup is vulnerable to "headline risk," analysts have noted, as it is also being investigated for its role in the Enron collapse. It also means executives like Michael Carpenter, Salomon's CEO, are spending more time dealing with regulatory issues rather than trying to improve the business.

"Clearly, the outstanding issues linked to Enron, WorldCom, and the Spitzer investigations are taking their toll on management's time at Citigroup," Morgan Stanley analyst Henry McVey said in a research note on Thursday, after meeting with Carpenter.

"Carpenter was quick to acknowledge that he is spending a 'significant' part of his time overseeing 'new' policies and new procedures to conform to the 'new' regulatory environment," McVey said.

Salomon was quick to adopt the new analyst guidelines Merrill agreed to as part of the Spitzer agreement, which included separating analyst pay from investment banking. It also said it would create a research review committee.