Quoted below is an excerpt on page C-3 of the Joint Report on Government Securities Market (1992), on a “practical joke” one Salomon employee tried to play on another. Two thoughts:
- This is the sort of reason why a customer would want to keep a close eye on his own statements. I sometimes wonder if we (I) put too much faith on the implicitly accuracy of our phone bills, credit card bills, stock portfolio/IRA statements, etc.
- Using customer funds without their knowledge continues to be an issue these days (example).
The excerpt, with added emphasis by me:
The February 7, 1991, 30-year bond auction. Salomon disclosed that it submitted an unauthorized customer bid in the amount of $1 billion in the February 7, 1991, $11 billion 3D- year bond auction as the result of a “practical joke.” Salomon claims that an employee arranged to have a customer submit a bid to a salesperson at Salomon for $1 billion of the 3D-year bonds as part of a practical joke on the salesperson. The Salomon employee was to have stopped the customer bid from actually being submitted and, following the auction, the customer was to complain that its bid was not filled. The Salomon employee was then to blame the salesperson for the failed bid.
Salomon has stated that the employee attempted to prevent the customer bid from actually being submitted prior to the auction by crossing out the bid on the work sheet of the clerk responsible for calling in the bids. According to Salomon the clerk did not understand the meaning of the cross-out and submitted the bid, which resulted in the customer being awarded $870 million of the bonds, as the $1 billion bid was subject to 87 percent proration. After the auction, the $870 million in bonds was placed into the account of another Salomon customer and then sold from that account to Salomon, allegedly without the customer’s authorization. Salomon has stated that its customer confirmations were suppressed. As a result, Salomon bid $2.331 billion for its own account and $1 billion as a result of the “practical joke.” The combined total of the two bids represented 30.2 percent of the issue and thus did not exceed 35 percent of the public offering.