Word: gutfreund
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Buffett, who owns 16% of Salomon's preferred stock and a legendary reputation for his investing, if not his investment-banking, savvy, assumed Solly's chairmanship after the board forced chairman John Gutfreund and two other top executives to step down. Buffett immediately brought in Deryck C. Maughan, 43, who until recently ran Salomon's Asian operations from Tokyo, and jettisoned two bond traders. Executives admitted that the firm had violated the rules that prohibit any one bidder from buying more than 35% of a single issue at a Treasury auction, and that they had skirted regulations barring a firm...
...rough-and-tumble culture that reveled in practical jokes. But the scandal that stunned the giant firm last week was no laughing matter. With the company's stock collapsing in the wake of disclosures that Salomon had repeatedly tried to corner the market for Treasury securities, chairman John Gutfreund and president Thomas Strauss said they would offer their resignations at an emergency board meeting on Sunday. The firm said directors would also consider the fate of vice chairman John Meriwether, one of Wall Street's most respected bond traders. Omaha billionaire Warren Buffett, who owns $700 million of Salomon...
...Salomon's infractions stopped there, the firm might have contained the damage. But Salomon dropped a bombshell last Wednesday when it admitted that Gutfreund, Strauss and Meriwether had learned last April of a trading violation but had failed to report it "due to a lack of sufficient attention" to the matter. The firm later found still more irregularities but apparently did not disclose them until faced with a government investigation. "The fact that they believed they didn't have to obey the rules is shocking," said Stephen Miller, a Philadelphia securities lawyer. "To be seen to have violated the rules...
...feared Salomon could even be barred from dealing in Treasury securities, a devastating penalty that could dry up most of the firm's profits. Such concerns caused the price of Salomon stock to plunge Thursday from 31 5/8 to 26 7/8. Buoyed by news of the imminent departure of Gutfreund, 61, and Strauss, 49, the stock finished the week...
...resignation of Gutfreund puts an end to one of Wall Street's most fabled careers. A gruff-talking, cigar-chomping bond trader, Gutfreund became chairman of Salomon in 1978. According to Liar's Poker, a 1989 best seller by Michael Lewis that described Salomon as a sort of financial Animal House, Gutfreund exhorted traders to come to work each morning "ready to bite the ass off a bear." When the traders were not executing centimillion-dollar deals, they delighted in such pranks as dumping garbage on one another's desks and replacing the contents of a male colleague's suitcase...