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Mozer Pleads Guilty to Falsifying Treasury Bids

October 1, 1993

NEW YORK (AP) _ Paul Mozer, a central figure in the Salomon Brothers Treasury bond scandal, pleaded guilty to two counts of making false statements about illegal billion- dollar bids at a 1991 Treasury auction.

Mozer, 38, fidgeted as he told U.S. District Judge Pierre N. Leval Thursday that he made false statements to the U.S. Treasury and Federal Reserve Board investigators.

The charge stems from two illegal bids, each totaling $3.15 billion, which Mozer authorized for 5-year Treasury notes on Feb. 21, 1991. Mozer said he submitted the bids under the names of two customers, Quantum Fund and Warburg Asset Management, without their permission, when in fact the bids were for Salomon.

″I knew at the time that in fact what I did was wrong,″ Mozer, former chief of Salomon’s bond trading desk, told Leval.

Mozer faces a maximum 10 years in prison and a $500,000 fine when he returns to court Dec. 14 for sentencing. He has agreed to pay the $500,000 fine, but the major question ahead is if Leval will impose prison time.

Working in Mozer’s favor for leniency was his cooperation with the government’s investigation of improper Treasury auction bidding by Salomon Brothers, a large and powerful government bond dealer on Wall Street.

The firm admitted placing false bids for Treasury securities between 1989 and 1991. Salomon Brothers last August agreed to pay $290 million to settle civil charges brought by the Securities and Exchange Commission.

One unresolved issue, however, is the amount of losses that were caused by Mozer’s activities. Attorneys for both sides will argue that issue in written motions, which are due by late November.

Stanley S. Arkin, Mozer’s lawyer, said in a statement earlier this year that Mozer didn’t make any money from the bids nor did the government or Salomon’s customers lose money.

If Leval determines Mozer’s conduct resulted in substantial losses, that could figure poorly for a lenient sentence.

Mozer’s plea caps a nearly 10-month legal odyssey. He was ready to submit the plea in January, but the agreement was rejected by U.S. District Judge Robert R. Patterson Jr., who found neither side agreed on the plea’s wording.

Mozer then was indicted by a federal grand jury on more serious charges of securities fraud and false record keeping, as well as making false statements.

The case was reassigned in February to Leval, who revived the plea agreement in July. Leval said prosecutors had wrongly accused Mozer of refusing to accept the deal and had mislead the previous judge into rejecting the plea bargain.