Business Notes Scandals

In his effort to clean up Salomon Brothers' tarnished image, Warren Buffett, the Wall Street investment house's new interim chairman, has announced plans to form an in-house compliance committee, hired an outside accountant and handed down commandments designed to strengthen the firm's integrity, if not its balance sheet.

Still, Salomon is plagued by the sins of its past. Last week it was disclosed that Paul Mozer, the bond trader said to have arranged the illegal trades in Treasury bills and bonds that initially got the firm into trouble, had sold 46,000 shares -- or about $1.7 million -- of Salomon stock before the scandal went public. The timing of the sell-off is crucial; Mozer could be charged with violating insider-trading regulations. Through his attorney, Mozer denies that he "sold the shares based on insider information" but also says he is willing to rescind the sale. Salomon's common stock has plummeted about 20% since the first bad news broke, so that could cost him hundreds of thousands of dollars.

Though New York State last week decided to allow Salomon to bid on some state treasury and Urban Development Corp. transactions, Moody's Investors Service was not so lenient: it downgraded Salomon's credit rating. The downgrading may further weaken investors' faith, making Buffett's job that much tougher.