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Salomon Loses California Pension Fund Business

August 20, 1991

NEW YORK (AP) _ Scandal-tainted Salomon Inc. suffered another blow today when the California state pension fund, the nation’s largest, suspended purchases of government securities through the giant Wall Street broker.

The move shows that Salomon is running into futher difficulties as it works to contain the damage from a trading scandal that has already brought down its top management.

The California Public Employees’ Retirement System, the biggest state pension fund, said it would stop buying government securities through Salomon ″for an indefinite period pending the outcome of the firm’s reorganization activities and findings of continuing investigations.″

Salomon Inc.’s brokerage, Salomon Brothers, has admitted illegally buying more than maximum allowed amount of government securities in several incidents, by submitting bids in the names of customers without authorization.

In a statement, the California pension fund expressed ″outrage and disappointment in the illegal activities of the firm,″ but said it was also encouraged by Salomon’s efforts to restore confidence in the firm.

Salomon’s activities are now under scrutiny by the Justice Department, the Securities and Exchange Commission, the Treasury and the Federal Reserve.

California said it will wait until the results of those probes are in and ″all questions of impropriety have been resolved″ before taking Salomon Brothers off probation.

There was no immediate response from Salomon to the suspended business from the California fund. Salomon’s own stock price, battered by the scandal, fell 75 cents a share to $25.50 this afternoon on the New York Stock Exchange.

Salomon has already accepted the resignations of John H. Gutfreund, chairman and chief executive of both Salomon and Salomon Brothers; Thomas W. Strauss, vice chairman of Salomon and president of Salomon Brothers; and John W. Meriwether, a vice chairman of Salomon Brothers.

Serving as Salomon’s interim chairman is multibillionaire Warren E. Buffett, of Omaha, Neb.

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