Plea Bargain in Salomon Bond Case Collapses

A plea-bargain agreement involving Paul W. Mozer, the central figure in the Salomon Bros. government bond bidding scandal, collapsed on Monday after federal prosecutors and Mozer’s attorney clashed on the agreement’s terms.

Prosecutors said they will now seek an indictment against Mozer, the former head of Salomon’s government bond trading desk. In a bid to escape a prison sentence, Mozer, as reported, agreed last week to plead guilty to two felony counts of lying to federal officials in connection with phony bids he submitted at a February, 1991, auction of five-year Treasury notes.

But the agreement came apart Monday amid a dispute over proposed language and the question of whether the plea bargain would protect Mozer from a possible separate prosecution for antitrust law violations.

Mozer’s attorney, Stanley Arkin, asked U. S. District Judge Robert P. Patterson Jr. to strike language in the agreement implying that Mozer had participated in a conspiracy and might have committed mail or wire fraud.

Mozer, 37, was dismissed by Salomon Bros. in August, 1991, after the scandal erupted. An internal investigation by Salomon uncovered evidence that Mozer surreptitiously arranged for Salomon to bid for more than 35% of the securities in several issues of Treasury securities in violation of Treasury regulations.

The scandal tarnished Salomon’s name and led to the resignations of three top Salomon officials: John Gutfreund, chairman; Thomas Straus, president, and John Meriwether, vice chairman. Salomon also paid $290 million in fines to settle charges filed by the Securities and Exchange Commission.

Arkin apparently objected to the broad language contained in the plea bargain because it might have given ammunition to the SEC and to litigants in numerous civil suits that Mozer also faces.