Salomon’s Improper Profits Under $5 Million : * Wall Street: An analysis finds that earnings from illegal Treasury auction bids were considerably less than estimated, firm says.

In the first public estimate of Salomon Bros. Inc.’s ill-gotten gains, the firm said Thursday that it had made only between $3.3 million and $4.6 million from its admitted improper bids in eight Treasury auctions.

The giant Wall Street firm had disclosed in August that it had flouted the rules in the Treasury’s auctions of government notes and bonds, prompting numerous investigations, lawsuits and the resignation of the firm’s top management.

A spokesman said the estimate of improper profits, far smaller than some estimates that had appeared in the press, was the result of 4,000 hours of analysis by Salomon officials, lawyers from the New York law firm of Cravath, Swaine & Moore and economists from Harvard University and UCLA.

“These numbers are much lower than those that had been bandied about,” said Fritz Schwartz, a senior partner at Cravath. But he added: “Even one penny is too much.”

Salomon’s bids in each of the auctions typically totaled more than $1 billion.

People close to the firm said they hoped that the relatively small estimate of profits would dispel the notion that the firm had reaped huge gains by, for example, illegally cornering the market for the two-year notes auctioned last May.

Salomon said the profit estimate was turned over to federal agencies investigating the firm, including the Justice Department, the Securities and Exchange Commission, the Federal Reserve and the Treasury Department.

William McLucas, the SEC’s enforcement director, and a spokesman for the New York Federal Reserve Bank each declined to comment on the Salomon report or say if they consider the estimate accurate.

In August, Salomon admitted that it covertly exceeded the government’s 35% limit on the share of securities any one firm may bid for in an auction and made false bids using the names of customers who hadn’t authorized them.

Salomon said it could only give an estimated range of the illegal profit, rather than a single hard figure, because the profit could be calculated different ways. The $4.6-million figure involved using the bond prices quoted publicly for sale to retail customers. The $3.3-million figure was based on the narrower range of prices Salomon could expect to get from its big institutional customers, the spokesman said.

Salomon said it also studied the profits it earned in 11 recent Treasury auctions in which there weren’t any bidding improprieties. Salomon bought more than $1 billion in securities in each of those auctions and said its average profit from the legitimate transactions were actually higher than the profits it made in all of the auctions in which it made improper bids, with the exception of the May auction.

In the May auction, in which Salomon and its customers ended up controlling more than 90% of the securities auctioned, the firm said it made between $16.7 million and $18.4 million. But it said that only about 18% of those figures could be chalked up to illegal activity by the firm.

The firm separately disclosed Thursday that it is restructuring and shrinking its real estate unit in a move that will involve an undisclosed number of layoffs.