Clark McLeod was found guilty of conducting improper stock trades in the late 1990s while he was chief executive officer of competitive carrier McLeodUSA, a judge ruled late last week.

The suit, filed by New York Attorney General Eliot Spitzer in 2002, accused McLeod--along with former telecom CEOs Bernie Ebbers, Joe Nacchio and others--of awarding investment banking business to Salomon Smith Barney in exchange for shares of companies that were about to conduct initial public offerings (IPOs). The practice is known as “spinning.”

According to Spitzer’s complaint, Salomon advised McLeodUSA on about 16 investment banking deals between October 1997 and January 2001, billing the competitive carrier nearly $50 million in fees. A month before McLeod’s first investment banking deal with Salomon, he received his first pre-IPO shares. He would receive 31 more through September 2000, selling them over time for a total of more than $9.4 million.

Meanwhile, Salomon research analyst Jack Grubman, who met with McLeod’s directors at their request in mid-2001, advised his clients to buy McLeodUSA stock between June 2000 and October 2001.

McLeod failed to disclose the details of his IPO allocations and the nature of McLeodUSA’s relationship with Salomon, Spitzer’s complaint reads, thus breaking the law.

According to reports in the Wall Street Journal and New York Times, Justice Richard B. Lowe III of the New York State Supreme Court in Manhattan called McLeod’s spinning "a sophisticated form of bribery." Lowe will specify damages at a later date.

McLeod’s attorneys, who deny any evidence connects their client’s banking business with his IPO allocations, are likely to appeal the decision, the reports said.