San Bernardino Sues Salomon, Claims Fraud

Citigroup Inc.’s Salomon Smith Barney Inc. and one of its brokers are being sued by San Bernardino County, which alleges that they defrauded the county and mishandled investments.

The suit claims that Salomon bribed officials in exchange for county business in the mid-1990s. The county paid unnecessary commissions to Salomon for some mutual fund purchases, said Dick Larsen, the county’s treasurer-tax collector. The county alleges breach of fiduciary responsibility, bribery and fraud.

The suit, filed Thursday in San Bernardino County Superior Court, claims that former county officials directed securities transactions to Salomon and broker Peter Morrison, in the company’s Newport Beach office. In exchange, the officials received “kickbacks” including trips to Costa Rica and Greece and other entertainment, the suit alleges.

Morrison and officials at Salomon Smith Barney in New York couldn’t immediately be reached to comment.

“These activities exhibit greed and callousness by individuals sworn to serve the public trust,” Larsen said in a statement. “I fully intend to see that taxpayers are made whole” by pursuing millions of dollars in damages.

Also named in the suit are Tom O’Donnell, former county treasurer-tax collector; James Hlawek, former county administrative officer; and Sol Levin, a former county investment officer. All three pleaded guilty to federal bribery charges in a case unrelated to the suit. Their indictments last October prompted a county investigation into certain investments, Larsen said.