Bond Scandal Figure Gets 4 Months, Fine

NEW YORK — A federal judge Tuesday sentenced the key figure in the 1991 Salomon Bros. Treasury bond scandal to four months in prison and a $30,000 fine.

U.S. District Judge Pierre N. Leval in Manhattan directed Paul W. Mozer, 38, the former head of Salomon’s government bond trading desk, to begin serving the sentence in a minimum security prison Jan. 18.

The scandal shook the staid world of government securities trading and for a time seemed to threaten the continued existence of Salomon, one of Wall Street’s most powerful trading firms. It brought down the firm’s chairman and chief executive, John H. Gutfreund, and other top executives, who were forced to resign. The firm was saved only after Warren E. Buffett, a major shareholder and one of America’s most highly regarded investors, agreed to step in temporarily as chairman.

Mozer pleaded guilty in October to two counts related to placing billions of dollars in bids for Treasury bonds in the names of Salomon customers who had never asked for the bonds. The false bids enabled Salomon to illegally circumvent a rule forbidding any firm from acquiring more than 35% of the bonds offered in a government auction. The investigation touched off by the disclosures ultimately involved many large Wall Street firms.

The judge rejected a claim by Mozer’s lawyer, Stanley Arkin, that Mozer’s illegal actions had resulted from two “spur of the moment” decisions. Leval described Mozer’s misdeeds as “willful, knowing, intentional, premeditated, planned and quite elaborately executed violations of the rules.”

The judge said Mozer deserved credit for cooperating with the government investigators. But he said some prison time was warranted to set an example. “Deterrence of others is an extremely important factor,” Leval said.

Probation officials, in a report to the judge, said they had not been able to determine whether anyone had actually lost money as a result of Mozer’s actions.