Massachusetts Secretary of the Commonwealth William Galvinsubpoenaed Citigroup Inc. along with Facebook Inc.'s leadunderwriters Morgan Stanley, Goldman Sachs Group Inc. and JPMorganChase & Co. in connection with the decline of Facebook's shareprice following its initial public offering in May, his officesaid.

Citigroup was fined $2 million after a junior analyst improperlydisclosed confidential information before Facebook Inc.'s IPO,Galvin's office said yesterday.

As a part of Facebook's underwriting syndicate, Citigroup GlobalMarkets was barred from disseminating research until 40 days afterthe stock offering, Galvin said yesterday in a statement. About twoweeks before the IPO, a junior analyst at the unit e-mailed twoemployees at TechCrunch.com seeking feedback on a Facebook documentthat contained a senior analyst's view of investment risks andrevenue estimates, Galvin said.

The Citigroup e-mails are part of a larger trove of documentsthat Galvin obtained by subpoenaing the bank along with the leadunderwriters, Galvin's office said. The probe began in May asFacebook's stock slid amid lawsuits alleging that retail investorsweren't told negative news about Facebook's prospects.

Galvin's Securities Division is focusing on the roles ofinvestment banks and securities analysts, and issues of disclosure,his office said.

The Citigroup penalty “should serve as a warning to the industryas a whole,” Galvin said in the statement about Citigroup. “It isessential in these times of rapid and diffuse means ofcommunications that financial institutions be vigilant to ensurethat the rules on IPOs are observed by all their personnel.”

The junior analyst, whose name wasn't released, was fired byCitigroup on Sept. 27, Galvin said. Yesterday, Citigroup fired MarkMahaney, a senior technology analyst, according to a person withdirect knowledge of the matter, as it settled Galvin's claim that ajunior analyst disclosed confidential information before Facebook'sIPO.

The exit of Mahaney, 46, resulted from earlier actions uncoveredin the course of the Facebook probe, according to a person familiarwith the matter. Mahaney, who was based in San Francisco, declinedto comment when reached yesterday by mobile phone.

Not at Bank

As of Friday, Mahaney was no longer at Citigroup, said thebank's spokeswoman, Sophia Stewart. “We take our internal policiesand procedures very seriously and have taken the appropriateactions,” she said in an e-mail.

JPMorgan spokesman Joseph Evangelisti declined to comment onGalvin's probe, as did Mary Claire Delaney, a Morgan Stanleyspokeswoman, and Leslie Shribman, a Goldman Sachs spokeswoman.

Galvin has said separately that he has subpoenaed MorganStanley, Facebook's primary underwriter, to learn more about talksbetween Scott Devitt, one of the firm's research analysts, and itsinstitutional investors about Facebook's revenue.

A drop in Facebook stock after the May 17 offering fueledshareholder complaints, regulatory probes and more than 40lawsuits, with some investors claiming the social-network company'smanagers failed to disclose revised forecasts before the IPO, andothers blaming underwriters or analysts.

Facebook has said the lawsuits lack merit.

The U.S. Securities and Exchange Commission also is looking atthe IPO, said a person familiar with the probe who asked not to beidentified because the probe is confidential. The top securitiesregulator wants to know whether retail investors were harmed bymisleading information from brokers or selective disclosures toanalysts by the Facebook's bankers regarding Facebook's prospectsfor mobile customers, the person said.

The SEC's focus is on whether Facebook information was leakedselectively to privileged investors, not on whether analysts wereimproperly disclosing their own research, as in the Citigroupcensure, the person said. If sales people attached to theunderwriting group led by Morgan Stanley were telling wealthyinvestors to stay away, while encouraging retail investors to buyall the shares they could, that might constitute illegalmisrepresentation, the person said.

Before Offering

Just days before the offering, Facebook officials privately toldsecurities-firm analysts to lower earnings and profit estimates —largely on the dearth of revenue from mobile users. A companydisclosure on May 9 warned investors that users were growing fasterthan advertising delivered to users. The warning was widelyreported by the media, so information was publicly available onFacebook's reduced expectations, even if retail investors didn'tread it.

The Senate Banking Committee is also looking into the socialnetwork's offering, and has held meetings “with a range of involvedparties including Facebook, Nasdaq, Morgan Stanley and the SEC,”said Sam Gilford, press secretary for the Senate committee, in ane-mailed statement.

Citigroup's e-mail exchanges were provided to Galvin's office onSept. 14 in response to a subpoena, the watchdog said.

Galvin faulted the Citigroup subsidiary for failing to superviseits analysts. The firm settled, admitted to a statement of factsand pledged to abide by state securities laws, he said.

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