In The Matter Of John H. Gutfreund Et Al.

51 SEC 93 (1992)

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Nature of the Case

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Facts

D was registered with P as a broker-dealer pursuant to Section 15(b) of the Exchange Act. D has been a government-designated dealer in U.S. Treasury securities since 1939 and a primary dealer since 1961. Gutfreund was the Chairman and Chief Executive Officer of Salomon from 1983 to August 18, 1991. Strauss was the President of Salomon from 1986 to August 18, 1991. Meriwether was a Vice Chairman of Salomon and in charge of all fixed income trading activities of the firm from 1988 to August 18, 1991. Feuerstein was the chief legal officer of D and the head of the Legal Department until August 23, 1991. Gutfreund, Strauss, and Meriwether were informed that Paul Mozer, the head of the firm's Government Trading Desk, had submitted a false bid in the amount of $3.15 billion in an auction of U.S. Treasury securities on February 21, 1991. Management was informed by Feuerstein that the submission of the false bid appeared to be a criminal act and, although not legally required, should be reported to the government. Gutfreund and Strauss agreed to report the matter to the Federal Reserve Bank of New York. Feuerstein did not follow up. For a period of months, none of the executives took action to investigate the matter or to discipline or impose limitations on Mozer. The information was not reported to the government for a period of months. During this period of not reporting, Mozer committed additional violations of the federal securities laws in connection with two subsequent auctions of U.S. Treasury securities. P stepped in and brought proceedings against Mozer and Mozer’s supervisors (Ds). This section of the deals with Feuerstein’s duties as the chief legal officer.