UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 34-40925 / January 11, 1999 ADMINISTRATIVE PROCEEDING File No. 3-9803 ___________________________________ : In the Matter of : ORDER MAKING FINDINGS : AND IMPOSING CERTAIN MARKET MAKING : SANCTIONS AS TO ACTIVITIES ON NASDAQ : SALOMON SMITH : BARNEY INC., GLENN Y. : BLITZER, BARRY J. : DUSTI, AND GEORGE ___________________________________: C. ROSS, JR. I. In the accompanying Order Instituting Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Findings of the Commission ("Order Instituting Proceedings"), the Securities and Exchange Commission ("Commission") instituted these public administrative proceedings against Salomon Smith Barney Inc. ("Salomon Smith Barney" or "Respondent"), as successor to Smith Barney Inc. ("Smith Barney"), Glenn Y. Blitzer, Barry J. Dusti, and George C. Ross, Jr., and other firms and individuals. Contemporaneously, Salomon Smith Barney Inc., Glenn Y. Blitzer, Barry J. Dusti, and George C. Ross, Jr., ("Respondents") have submitted Offers of Settlement ("Offers") in anticipation of the institution of these proceedings, which the Commission has determined to accept. In their Offers, Respondents, solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, prior to a hearing pursuant to the Commission’s Rules of Practice, and without admitting or denying the findings herein, except for the findings of Section II.A., which are admitted, have consented to the entry of the Order Instituting Proceedings and this Order Making Findings and Imposing Sanctions as to Salomon Smith Barney Inc., Glenn Y. Blitzer, Barry J. Dusti, and George C. Ross, Jr. (which are hereinafter referred to as the "Orders"). The Commission has determined that it is appropriate and in the public interest to accept the Respondents’ Offers and accordingly is issuing this Order. II. On the basis of the Orders and Respondents’ Offers, the Commission finds[1] the following: A. Respondents Salomon Smith Barney is a New York corporation registered with the Commission as a broker-dealer pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act") and a member of the National Association of Securities Dealers, Inc. ("NASD"), a national securities association registered with the Commission under Section 15A of the Exchange Act. Salomon Smith Barney is the successor to Smith Barney, which was in 1994 a Delaware corporation registered with the Commission as a broker-dealer pursuant to Section 15(b) of the Exchange Act. At all relevant times, Smith Barney made markets in a number of securities traded in the Nasdaq market. Smith Barney's principal place of business during the relevant time period was New York, New York. Smith Barney traded Nasdaq stocks for its own accounts and for the accounts of institutional and retail investors. At all times relevant herein, Smith Barney was a member of the NASD. Glenn Y. Blitzer, age 36, resides in Warren, New Jersey and, at all relevant times, was a Nasdaq trader at Smith Barney. As a Nasdaq trader, Glenn Y. Blitzer was responsible for making markets in certain securities traded on the Nasdaq Stock Market. Barry J. Dusti, age 40, resides in Wilton, Connecticut and, at all relevant times, was a Nasdaq trader at Smith Barney. As a Nasdaq trader, Barry J. Dusti was responsible for making markets in certain securities traded on the Nasdaq Stock Market. George C. Ross, Jr., age 28, resides in Rye, New York and, at all relevant times, was an assistant Nasdaq trader at Smith Barney. As an assistant Nasdaq trader, George C. Ross, Jr. was responsible for making markets in certain securities traded on the Nasdaq Stock Market. B. Factual Summary In connection with its activities as a Nasdaq market maker, Smith Barney, Glenn Y. Blitzer, Barry J. Dusti, and George C. Ross, Jr. engaged in the following activities, as more fully described in the applicable sections of the accompanying Order Instituting Proceedings, in the following securities and on the following dates. 1. The Fraudulent Coordination of Quote Movements Smith Barney engaged in, or caused, the coordinated entry of quotations on Nasdaq in violation of Sections 15(c)(1) and (2) of the Exchange Act and Rules 15c1-2 and 15c2-7 thereunder, in one or more of the respects described in Section II.C.1. of the Order Instituting Proceedings in a market making transaction or a related series of market making transactions in: a. the stock of ECI Telecom Ltd. ("ECILF") on October 27, 1994, aided and abetted by its trader Glenn Y. Blitzer; b. the stock of Infinity Broadcasting Corp. ("INFTA") in two violations on April 12, 1994, aided and abetted by its trader Barry J. Dusti; c. the stock of Infinity Broadcasting Corp. ("INFTA") on May 26, 1994, aided and abetted by its trader Barry J. Dusti; d. the stock of Chiron Corp. ("CHIR") on May 17, 1994, aided and abetted by its trader Barry J. Dusti; e. the stock of Credence Systems Corp. ("CMOS") on September 20, 1994, aided and abetted by its trader Barry J. Dusti; f. the stock of Meridian Sports, Inc. ("MSPO") on October 24, 1994, aided and abetted by its trader Barry J. Dusti; and g. the stock of KLA Instruments Corp. ("KLAC") on May 26, 1994, aided and abetted by its assistant trader George C. Ross, Jr. 2. Undisclosed Arrangements to Coordinate Quotations Smith Barney entered, or caused to be entered, in the Nasdaq market fictitious quotations in one or more respects described in Section II.C.2. of the Order Instituting Proceedings in violation of Section 15(c)(2) of the Exchange Act and Rule 15c2-7 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of Proteon, Inc. ("PTON") in two violations on September 27, 1994, aided and abetted by its trader Glenn Y. Blitzer; b. the stock of ECI Telecom, Inc. ("ECILF") on October 27, 1994, aided and abetted by its trader Glenn Y. Blitzer; c. the stock of Tellabs, Inc. ("TLAB") in two violations on October 26, 1994, aided and abetted by its trader Glenn Y. Blitzer; d. the stock of Infinity Broadcasting Corp. ("INFTA") in two violations on April 11, 1994, aided and abetted by its trader Barry J. Dusti; e. the stock of Infinity Broadcasting Corp. ("INFTA") on April 12, 1994, aided and abetted by its trader Barry J. Dusti; f. the stock of Infinity Broadcasting Corp. ("INFTA") on May 24, 1994, aided and abetted by its trader Barry J. Dusti; g. the stock of Infinity Broadcasting Corp. ("INFTA") on June 6, 1994, aided and abetted by its trader Barry J. Dusti; h. the stock of Credence Systems Corp. ("CMOS") on September 19, 1994, aided and abetted by its trader Barry J. Dusti; i. the stock of Credence Systems Corp. ("CMOS") on October 21, 1994, aided and abetted by its trader Barry J. Dusti; j. the stock of Autodesk, Inc. ("ACAD") on October 25, 1994, aided and abetted by its trader Barry J. Dusti; k. the stock of Biogen, Inc. ("BGEN") on May 25, 1994, aided and abetted by its assistant trader George C. Ross, Jr.; and l. the stock of Aspect Telecommunication Corp. ("ASPT") on October 19, 1994. 3. Best Execution Violations Smith Barney failed, or caused the failure, to provide best execution in the handling of customer orders in one or more of the respects described in Section II.C.5. of the Order Instituting Proceedings in violation of Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of KLA Instruments Corp. ("KLAC") on May 25, 1994, aided and abetted by its assistant trader George C. Ross, Jr. 4. Failure to Keep Accurate Books and Records Smith Barney failed to keep and maintain accurate books and records in one or more of the respects described in Section II.C.7. of the Order Instituting Proceedings in violation of Section 17(a) of the Exchange Act and Rule 17a- 3 thereunder, in a market making transaction or related series of market making transactions in: a. the stock of Comcast Corp. - Class A ("CMCSK") on August 12, 1994; and b. the stock of Michaels Stores, Inc. ("MIKE") on October 13, 1994. 5. Failure to Reasonably Supervise Nasdaq Trading Smith Barney failed reasonably to supervise its Nasdaq market making activities with a view to preventing future violations within the meaning of Section 15(b)(4)(E) of the Exchange Act, in one or more of the respects described in Section II.C.8.a. and b. of the Order Instituting Proceedings. 6. Unlawful Profits and Other Gains While engaged in certain of the improper activities described above, Smith Barney obtained unlawful profits and gains, which, together with interest, total $24,766.00. III. By reason of the foregoing, Smith Barney willfully violated Sections 15(c)(1) and (2), and 17(a) of the Exchange Act and Rules 15c1-2, 15c2-7 and 17a-3 thereunder and failed reasonably to supervise its Nasdaq trading personnel within the meaning of Section 15(b)(4)(E) of the Exchange Act. Glenn Y. Blitzer, Barry J. Dusti, and George C. Ross, Jr. willfully aided and abetted and caused violations of Section 15(c)(1) and (2) of the Exchange Act and Rules 15c1-2 and 15c2-7 thereunder. IV. In view of the foregoing and Respondents’ Offers, IT IS HEREBY ORDERED, pursuant to Sections 15(b) and 21C of the Exchange Act, that[2]: 1. Salomon Smith Barney shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2) and 17(a)(3) of the Exchange Act and Rules 15c1-2, 15c2-7 and 17a-3 thereunder; 2. Salomon Smith Barney shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $735,000.00 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand- delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Salomon Smith Barney as a Respondent in these proceedings and provides the caption and file number for these proceedings; with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check, to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 3. Salomon Smith Barney shall, within 10 business days of written notice from the Commission staff or the Independent Consultant (as defined below), pay disgorgement in the amount of $24,766.00 pursuant to Section 21C(e) of the Exchange Act; 4. Salomon Smith Barney shall, within 90 days of the date of the entry of this Order, provide to the independent consultant appointed by the Commission in connection with these proceedings (the "Independent Consultant") a description of its policies, procedures and practices relating to prevention or detection of the types of improper conduct involving Smith Barney described in Section II of this Order. Within such time as the Commission directs, the Independent Consultant shall review such policies, procedures and practices with a view to determining if they would reasonably be expected to prevent and detect, insofar as practicable, any of the types of improper conduct involving Smith Barney described in Section II of this Order. Salomon Smith Barney shall cooperate with the Independent Consultant’s review of Salomon Smith Barney’s policies, procedures and practices, and shall, among other things, provide such further information as the Independent Consultant reasonably requests or that Salomon Smith Barney deems relevant to the Independent Consultant’s review, provided, however, that Salomon Smith Barney need not provide any information to which it asserts a valid claim of the attorney-client privilege. The Independent Consultant shall maintain the confidentiality of all materials provided by Salomon Smith Barney and shall not provide the materials to any person, provided, however, that such materials may be provided to the Commission or its staff. If the Independent Consultant concludes that Salomon Smith Barney’s policies, procedures and practices, as presented, would reasonably be expected to prevent and detect, insofar as practicable, any of the types of improper conduct involving Smith Barney described in Section II of this Order, the Independent Consultant shall inform Salomon Smith Barney of this conclusion in writing, and his or her responsibilities with respect to Salomon Smith Barney shall conclude. If the Independent Consultant cannot conclude that Salomon Smith Barney’s policies, procedures and practices meet the aforesaid standard, he or she may recommend changes in or additions to Salomon Smith Barney’s policies, procedures or practices for the purpose of improving their ability to meet the aforesaid standard. Salomon Smith Barney shall implement all such recommended changes or additions in a timely manner, but in any event no later than three months after receiving the recommendations of the Independent Consultant or such other reasonable time as determined by the Independent Consultant; provided, however, if Salomon Smith Barney believes that a change or addition to its policies, procedures and practices recommended by the Independent Consultant is unduly burdensome or unreasonable, it may: (a) propose an equally effective alternative to the Independent Consultant, and, with the Independent Consultant’s approval, implement that alternative in lieu of the Independent Consultant’s recommended change or addition; or (b) petition the Commission, with notice to the Independent Consultant and the Division of Enforcement, for relief from the recommendation of the Independent Consultant. Within three months of receiving recommendations of the Independent Consultant for changes in or additions to its policies, procedures and practices, Salomon Smith Barney shall report in writing to the Independent Consultant with respect to the implementation of the recommendations and/or any equally effective alternatives approved by the Independent Consultant. If Salomon Smith Barney’s report on implementation is without qualification and states that said recommendations and/or alternatives have been fully and effectively implemented, the Independent Consultant’s responsibilities with respect to Salomon Smith Barney shall conclude. If Salomon Smith Barney’s report on implementation is qualified, or in any respect indicates that implementation is not full and effective, Salomon Smith Barney shall cooperate with all further efforts of the Independent Consultant to ensure that said recommendations and/or alternatives are fully and effectively implemented. When the Independent Consultant concludes that Salomon Smith Barney has fully and effectively implemented said recommendations and/or alternatives, he or she shall inform Salomon Smith Barney in writing of this conclusion and his or her responsibilities with respect to Salomon Smith Barney shall conclude. The fees and expenses of the Independent Consultant arising from his or her review of the policies, procedures and practices of Salomon Smith Barney and the other respondent firms subject to the Independent Consultant’s review shall be prorated evenly among such firms, and in such prorated amounts, be paid by each such firm, provided however, that if the Independent Consultant recommends changes or additions to Salomon Smith Barney’s policies, procedures or practices, the fees and expenses of the Independent Consultant relating to the making and implementation of those recommendations and/or any alternatives approved by the Independent Consultant, and any disagreements relating thereto, shall be paid by Salomon Smith Barney; 5. Glenn Y. Blitzer shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder; 6. Glenn Y. Blitzer shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $35,000.00 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Glenn Y. Blitzer as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 7. Glenn Y. Blitzer be, and hereby is, suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of nine weeks, effective one day after the date of this Order; and Glenn Y. Blitzer shall provide to the Commission, within 10 days after the end of the nine week suspension described above, an affidavit that he has complied fully with the sanctions described in this Section; 8. Barry J. Dusti shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder; 9. Barry J. Dusti shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $90,000.00 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Barry J. Dusti as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 10. Barry J. Dusti be, and hereby is, suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of five months, effective one day after the date of this Order; and Barry J. Dusti shall provide to the Commission, within 10 days after the end of the five month suspension described above, an affidavit that he has complied fully with the sanctions described in this Section; 11. George C. Ross, Jr. shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder; 12. George C. Ross, Jr. shall, within 10 business days of the entry of this Order, pay a civil penalty in the amount of $25,000.00 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies George C. Ross, Jr. as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; and 13. George C. Ross, Jr. be, and hereby is, suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of seven weeks, **FOOTNOTES** [1]: The findings herein are solely for the purpose of these proceedings, and are not binding on any person not a respondent in these proceedings. [2]: Salomon Smith Barney has simultaneously entered into a settlement of these proceedings in its capacity as the successor to Salomon Brothers Inc (the "Salomon Brothers settlement"). To the extent that paragraphs IV.1 and IV.4 herein are duplicative of the corresponding provisions ordered by theCommission in the Salomon Brothers settlement, such duplicative provisionsshall be deemed to impose unitary, and not dual, obligations on Salomon SmithBarney. 1 effective one day after the date of this Order; and George C. Ross, Jr. shall provide to the Commission, within 10 days after the end of the seven week suspension described above, an affidavit that he has complied fully with the sanctions described in this Section. By the Commission. Jonathan G. Katz Secretary 2