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In July 2002, Salomon Smith Barney, the US investment bank, claimed a former broker who had gone public with allegations of crooked IPO practices was not dismissed from the firm for whistle blowing but for misconduct.

Salomon said David Chacon, who worked in the Los Angeles office until 2000, was fired for unauthorised trading in client accounts and for stealing commissions from other brokers.

Salomon was retaliating amid a growing conflict with Mr Chacon after he said the bank had doled out shares of sought-after IPOs to top telecom executives in return for promises of future business.

Mr Chacon filed a wrongful termination suit against Salomon a year ago in which he largely accused the bank of racial discrimination. But he has since amended the complaint to say he was terminated for repeatedly complaining about its IPO practices.

Salomon said that Mr Chacon's allegations were "without merit". The bank also questioned the validity of a whistle-blowing memo Mr Chacon claims to have sent to Salomon's national sales manager in May 2000 complaining about its IPO practices.

The allegations come at a time when Salomon and Mr Grubman are already under scrutiny from lawmakers and regulators for their close ties to WorldCom.