Prosecutors probing the integrity of Wall Street analysts have ordered telecoms giant AT&T to hand over documents relating to a lucrative business deal.

New York Attorney General Eliot Spitzer has issued a subpoena requesting papers relating to AT&T's choice of investment bankers when it floated its wireless division.

Mr Spitzer leads the investigation into analyst recommendations

The firm chose as one of three underwriters Salomon Smith Barney, a unit of Citigroup.

Yet according to the Wall Street Journal newspaper, Salomon Smith Barney was picked only after its star analyst, Jack Grubman, upgraded his rating of AT&T shares to "buy" after years of bearish comments.

Mr Spitzer is spearheading an investigation into Wall Street analysts, accused of issuing glowing reports on firms they privately disparaged so as to keep open the possibility of gaining investment banking business from them.

Earlier this year, Wall Street giant Merrill Lynch paid $100m to settle an investigation led by Mr Spitzer.

Citigroup boss implicated

One report suggested that Citigroup chief executive Sanford Weill may have pressured Mr Grubman to change his rating on AT&T.

This would have helped the Salomon Smith Barney secure its position as flotation adviser, a joint position which netted it some $45m in fees.

A spokeswoman for the bank said: "Mr Weill never told any analyst what to write and suggestion that he did is outrageous and untrue."

Market reaction

Mr Grubman - a cheerleader for the now fallen telecoms sector - resigned from Salomon last week.

He faced criticism for his unfailing support for clearly failing companies such as WorldCom.

Mr Grubman has already testified in Congressional hearings on the collapse of WorldCom.

The implication of Salomon in the ongoing investigations is clearly hurting its parent company, whose share price has fallen 30% this year.

"Clearly the outstanding issues linked to Enron, WorldCom and the Spitzer investigations are taking their toll on management's time at Citigroup," Morgan Stanley analyst Henry McVey said.

Shares in Citigroup fell $1.20 to $33.98 in early trading on Friday.