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Internal Fued Erupts at the NASD
By Beth Piskora  
N.Y. Post
NEW YORK — An influential member of the National Association of Securities Dealers' board of governors has declared war on the group's chairman, Frank Zarb.

Alan Davidson took his ongoing feud with Zarb up a few big notches yesterday, accusing the NASD chairman of lacking the ethics needed for the job, and demanding that he step down.

"The NASD is a regulatory body that has extraordinary powers, and as such, we need someone of the highest integrity to occupy the chief position," Davidson told The Post. "Zarb is not the appropriate person for this job because a jury recently found him guilty of fraud."

But a NASD spokesman said Zarb has no immediate intention of going anywhere.

"He has a contract that runs through February, 2001," said Andy Macmillan of the NASD, adding that Zarb intends to see the private placement plan through its three stages.

He dismissed Davidson's comments as "rubbish."

"It is a transparent and desperate attempt to serve his own purpose, and no serious person who is familiar with the facts would be misled by it," said Andy Macmillan.

In December, a New Jersey jury found in favor of former Giants football star Phil McConkey, who said he was misled by Zarb into taking a job with an insurance brokerage, Alexander & Alexander. Zarb was chairman of the firm at the time.

McConkey lost his job when Alexander & Alexander was subsequently taken over by Aon, and he promptly filed suit against Aon. The jury ruled that Aon had to pay McConkey $10 million because Zarb had lied and said Alexander & Alexander was the predator, not the prey.

Davidson believes that in itself is reason enough for Zarb to step down.

"As a board member, I have a fiduciary responsibility to do what's best for the company," Davidson said. "Zarb seems to want to drag this company down into the gutter with him."

Davidson said the only reason he did not demand Zarb's resignation immediately after the jury's decision was because he was under the impression that Zarb would soon leave of his own volition.

"He declared to the board that he was leaving the NASD, but now he's flip-flopping," Davidson said, adding that Zarb told the board in December that he planned to stay on only three more months.

This most recent attack on Zarb by Davidson escalates the war of words between the two. The battle has been raging for several months, as Zarb moves forward with a plan to spin the Nasdaq Market off from the NASD. Davidson opposes the plan.

However, the spin-off was originally intended to be completed by spring of 2000, which suggests that Zarb may have thought he would be free to retire by then. Because of delays, the spinoff may not be complete until early next year.

Davidson said that if Zarb doesn't resign immediately, he will ask the Securities and Exchange Commission to kick him out.

Close to 6,000 members of the NASD have been voting on the first stage of the plan, a partial private placement, with the results to be released on Friday. Sources close to the NASD say the vote is overwhelmingly for the plan.

Davidson, however, says there are more no votes.

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