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Mozer Sentenced to Four Months In Salomon Treasury Scandal

December 14, 1993

NEW YORK (AP) _ A federal judge on Tuesday sentenced former Salomon Brothers trader Paul Mozer to four months in prison for lying to regulators about illegal bids in the Salomon Treasury auction scandal.

U.S. District Judge Pierre N. Leval rejected a defense request for probation, citing the seriousness of the offense.

″In the world of financial crimes, deterrence of others is an extremely important aspect of sentencing,″ Leval told Mozer, a 38-year-old former managing director of Salomon.

Mozer pleaded guilty in October to two counts of making false statements to Federal Reserve Bank investigators concerning two illegal bids he authorized for $6 billion of 5-year Treasury notes on Feb. 21, 1991. The bids were $2 billion above Salomon’s permitted share in the auction. Leval said Mozer gained an advantage from the illegal bids, although the nature of the advantage remains in dispute.

″He did hope to gain an advantage by willful, knowing, intentional, premeditated, planned and a quite elaborately executed violation of the rules,″ Leval said.

Prosecutor John W. Auchincloss II described Mozer’s conduct as a ″cynical and arrogant violation of trust″ that the Treasury places in a handful of major Wall Street firms that bid directly for government bonds.

Mozer, dressed in a dark business suit, was stoic as the judge handed down his sentence. He issued a brief statement in court expressing his regret for his conduct and left the courtroom quickly.

″I realize what I did was wrong,″ Mozer said, adding that he didn’t intend to personally profit from his conduct.

As part of Mozer’s plea, he agreed to pay $500,000 into an escrow account to cover potential civil penalties from a pending Securities and Exchange Commission investigation. In addition, Leval imposed an additional $30,000 fine.

Mozer faced a maximum prison term of 10 years, but federal sentencing guidelines constrained the judge from imposing more than a 16-month term due to Mozer’s cooperation and his lack of a criminal history.

The judge ordered Mozer to begin serving his sentence in a minimum security prison on Jan. 18. Leval denied a request by Mozer’s attorney, Stanley Arkin, to have his client serve part of his sentence at home or at a half-way house.

Mozer was the only person to face a criminal indictment in the Salomon Treasury bidding scandal. Salomon, one of the most powerful firms on Wall Street, admitted placing false bids for Treasury securities between 1989 and 1991 and settled Securities and Exchange Commission charges in 1992 by paying a $290 million fine.

Revelations of illegal bidding led to extensive Congressional hearings and reforms of the vast Treasury securities market, which plays a crucial role in the economy by financial the government’s debt and establishing a ground floor for a variety of interest rates on mortgages and credit card loans.

Arkin had argued for community service and probation based on his client’s extensive cooperation with government investigators. Mozer provided details about illegal manipulation of the Treasury bond market that led to investigations of Salomon, Goldman Sachs, Daiwa Securities and several Japanese investors, Arkin said.

Arkin also argued that Mozer authorized the illegal bids not for personal profit but for a ″mindless desire for administrative convenience.″

Arkin also argued that Mozer had suffered considerably, having lost at least $11.5 million in compensation from leaving Salomon.

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