Defunct auction site sues Salomon for $1 billion.

Salomon Smith Barney is being sued by a now-defunct online auctioneer, Z Auction, for negligence and breach of contract after allegedly failing to raise any money in a $10 million private placement. Z Auction, which describes itself as the first online auction site to appear on America Online, said Salomon misled it into thinking funding was imminent, advised it to reject valuable offers and assigned the transaction to a junior person who had an 80-percent failure rate in raising funds. As a result of Salomon_s handling of the financing, "Z Auction was destroyed as a viable business," its lawyers, Robert C. Rosen and John B. Wallace, said in the suit. Z Auction, formerly based in Calabasas, California, hired Salomon in 1997 to secure funding in anticipation of an initial public offering, the suit claims. The suit, filed today in Los Angeles Superior Court, seeks more than $1 billion in damages from Salomon, the securities unit of Citigroup. A Salomon spokesman was unable to immediately comment on the suit. Shares of New York-based Citigroup, the world_s No. 1 financial services firm, fell 1.31 to 54.06.