Pension Fund Stops Dealings With Salomon : Investing: The California Public Employees’ Retirement System says it will no longer trade Treasury securities with the scandal-tainted firm.

The California Public Employees’ Retirement System, one of the nation’s largest pension funds, said Tuesday that it will suspend trading U.S. Treasury securities with Salomon Bros. Inc., the scandal-plagued Wall Street investment firm

CalPERS, which manages a $64-billion pension fund for state workers, said its board took the action to express “outrage and disappointment” in Salomon’s illegal activities. Salomon has admitted breaking the rules at Treasury market auctions.

The move by CalPERS was seen by securities industry analysts as a further blow to Salomon’s prestige but was expected to have little financial impact on the firm. There are scant signs that significant numbers of other institutional investors were abandoning the firm.

Salomon spokesman Robert F. Baker Jr. contended that Salomon’s customer business Tuesday in bond transactions was the same as on a normal day before the scandal broke Aug. 9. He declined to supply specific figures.

Salomon’s stock, which has been hammered since news of the scandal surfaced, fell another 75 cents a share Tuesday, closing at $25.50 on the New York Stock Exchange.

In a separate development, CalPERS said it will resume normal business ties with a firm that manages some of its assets, New York-based Nomura Capital Management, provided that no securities trading for CalPERS is done through Nomura Securities, Japan’s largest brokerage. Nomura Securities, which in June admitted illegal activities in Tokyo stock trading, owns a minority stake in Nomura Capital Management.

CalPERS has become one of the most outspoken pension funds on a variety of matters, including making companies more responsive to their big institutional shareholders and complaining about excessive pay to managers of under-performing companies. Because of its size and prestige, CalPERS’ actions sometimes influence other large pension funds.

CalPERS said Tuesday that it will continue to do other types of business with Salomon, including trading mortgage-backed securities, corporate bonds and stocks. Only about 15% of its government securities trading was done through Salomon, CalPERS officials said.

DeWitt F. Bowman, CalPERS’ chief investment officer, acknowledged that “we’re not talking about a large amount (of money).”

He said CalPERS’ board was pleased with the swift action Salomon took after admitting the scandal, including naming respected billionaire investor Warren E. Buffett interim chairman. “I think what they’re doing is the right thing to correct and contain this scandal,” Bowman said.

Nevertheless, Bowman said, CalPERS felt that it necessary to publicly take action against the firm because “the issue involved here--the integrity of the markets--is very important to us.” CalPERS said the suspension is to remain in effect indefinitely while CalPERS reviews changes under way at Salomon and the results of pending government investigations.

Salomon acknowledged covertly buying more than the maximum allowed 35% share of Treasury notes and bonds in several government-run auctions. Salomon also admitted making bids in the name of customers who hadn’t authorized them.

The firm faces possible criminal and civil prosecution by several government agencies. Salomon Chairman and Chief Executive John H. Gutfreund and President Thomas W. Strauss resigned Sunday.

John Keefe, an analyst with Lipper Analytical Securities, said “it’s really much too early to tell” how much customer business Salomon will lose as a result of its misdeeds.

Another big pension fund, the Wisconsin Investment Board, said last week that it had suspended government securities trading with Salomon.

But the California State Teachers Retirement System said Tuesday that it has no plans to curtail business with Salomon. James D. Mosman, chief executive of the $35-billion fund, said that without formal charges by the Securities and Exchange Commission or other agency against Salomon, action by his fund would be “premature.”