Citigroup

Citigroup Settles Securities and Exchange Commission Charges Over Accounting Issues Related to Argentine Bonds

Published on: June 25, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Without admitting to our denying any wrongdoing, Citigroup has agreed to settle Securities and Exchange Commission charges that it took part in improper accounting related to specific Argentine bonds. According to the SEC, Citigroup was able to avoid paying another $479 million in pre-tax charges during the 4th quarter of 2001.

Citigroup became affected by Argentina’s economic and political problems because the bank owns Argentine government bonds and over $1 billion in Argentine-related consumer loans. Because of the crisis, the South American country’s government had to default on certain sovereign debt obligations and devalue the country’s currency.

Citibank had to make several accounting decisions, including those involving Argentine government bonds that were not eligible for bond swap, government-sponsored exchanges involving bonds for loans, the sale of Banco Bansud S.A. (a bank subsidiary that Citigroup had acquired), and the result of government actions that lead to the conversion of $1 billion in Citigroup loans to Argentine pesos.

Countrywide Financial, Merrill Lynch, and Citigroup Executives Defend Their Hefty Compensations Following Subprime Mortgage Crisis

Published on: March 12, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Appearing before the U.S. Congress last week, Countrywide Financial CEO and founder Angelo Mozilo, Ex-Citigroup CEO Charles Prince, and Ex-Merrill Lynch Chairman and CEO Stanley O’Neil gave their testimonies to the House Committee on Government and Oversight Reform.

The three men say that reports about their compensation are “grossly exaggerated” and that they too have lost millions of dollars from the mortgage debacle. On Thursday, the Congressional issued a report stating that the three men earned $460 million between 2002 and 2006.

All three men say their income from the firms are tied to the profits that the companies made in the years prior to the mortgage crisis and that their company stock has dropped dramatically since then.

Citibank and Columbia University Sued for Charging College Students Extremely High Interest Rates on School Loans

Published on: December 23, 2007 | by Shepherd Smith Edwards & Kantas, LLP

A former Columbia University student is suing Citibank and Columbia University for what he is calling “modern-day slavery,” for allegedly colluding to charge unreasonably high interest rates on student loans.

Brian Baxter, 57, is now a licensed psychotherapist and a social worker. He graduated from Columbia University in the 1990’s with a BA in sociology and a master’s in social work. Baxter says that he is still paying back the interest on his student loan even though it has been 10 years since he graduated.

He says that his $65,000 loan has turned into $172,000. Creditors take 15% of his paycheck regularly. Baxter says he will likely spend the rest of his life paying back his debt.

HSBC Securities, Citigroup Global Markets Inc., UBS Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Inc., and Interactive Brokers LLC Among Firms Disciplined by NYSER

Published on: October 21, 2007 | by Shepherd Smith Edwards & Kantas, LLP

The New York Stock Exchange Regulation Inc. is disciplining nine companies and eight people for numerous violation. The firms disciplined include:

Merrill Lynch, Pierce, Fenner & Smith: Fined $100,000 for violating rule 123c about 480 times when it cancelled or submitted securities orders after the mandatory cutoff period.

Citigroup Global markets Inc: Find $300,000-half of this to be payed to NASDAQ; the other half to be paid to NYSE. The firm made inaccurate reports about short interest positions in securities that were listed on the NYSE.

Citigroup, Lehman Brothers, DeutscheBank and other Firms Fined for Failing to Deliver Trade Confirmations.

Published on: October 9, 2007 | by Shepherd Smith Edwards & Kantas, LLP

NYSE Regulation fined 14 of its member firms a total of $10.4 million in fines for failing to deliver trade confirmations to their clients and other violations.

Citigroup Global Markets received the heaviest fine of $2.25 million for failing to deliver trade confirmation documents in more than a million consumer transactions. Lehman Brothers and DeutscheBank were each fined $1.25 million.

Other firms sanctioned included UBS Securities; Bear Stearns & Co.; Credit Suisse Securities (USA) LLC ; Banc of America Securities LLC; Goldman Sachs & Co.; JP Morgan Securities; Wachovia Capital Markets LLC; and Keefe, Bruyette & Woods Inc. Fines levied against these firms ranged from $375,000 to $800,000.

Citigroup’s Smith Barney Unit Ordered to Pay $50 Million over Widespread Fraud Charges

Published on: July 24, 2007 | by Shepherd Smith Edwards & Kantas, LLP

In one of its final regulatory acts before being folded into the NASD, the New York Stock Exchange’s regulatory unit has censured and fined Smith Barney $50 million over illegal trades, failures to supervise and record-keeping violations. The firm agreed to the sanctions without admitting or denying the charges.

The Smith Barney unit of Citigroup Global Markets Inc. will pay a fine of $10 million to the NYSE, and a fine of $5 million to the State of New Jersey, related to a “separate regulatory matter arising out of the same conduct.” An additional $35 million will be paid into a restitution fund to compensate victims.

The NYSE regulators say Smith Barney agreed to these huge sanctions to resolve charges related to a variety of fraudulent trading activities, including excessive trading, improper trading in mutual fund shares, improper trading in variable annuity mutual fund sub-accounts, illegal market timing trades, plus the firm’s failures to supervise and to maintain adequate books and records.

NASD Says Citigroup To Pay $15.2 Million For Misleading BellSouth Retirees

Published on: June 18, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Citigroup Global Markets Inc is being charged $3 million by NASD to settle charges connected to misleading materials it allegedly gave Bellsouth employees during retirement meetings and seminars held in North Carolina and South Carolina. NASD also says that Citigroup has to pay over 200 ex-Bellsouth employees $12.2 million in restitution. The latter comes came from a civil class action involving Smith Barney, which had tried to get the case dismissed under SLUSA.

NASD says that Citigroup neglected to properly supervise certain brokers located in Charlotte, North Carolina that used the misleading sales materials during numerous meetings with BellSouth Corp. employees. The materials made “exaggerated and unwarranted projections of future earnings” and did not elaborate on the related risks of making certain investments.

Following these presentations, over 400 BellSouth employees opened more than 1100 accounts via these brokers. Many of their investors had retired early from BellSouth and had less than $350,000 in savings. Many of them cashed out their 401(k) accounts and pensions and invested these funds with the Citigroup brokers.

Former Head of Commodity Trading and Head Trader at Citibank Both Jailed for Inflating Profits

Published on: May 30, 2007 | by Shepherd Smith Edwards & Kantas, LLP

After his former boss was sentenced, a former head of American trading on the Citibank NA commodity desk was sentenced in May to 12 months and a day in prison and ordered to pay approximately $188,000 after pleading guilty to conspiring to falsify bank records and to commit wire fraud, said a U.S. Attorney for the Southern District of New York.

U.S. Attorney Michael Garcia said Charles Craig Gile schemed to inflate trading profits of the Citibank commodity desk by as much as $20 million during 2003 to increase his stature at the firm and make himself eligible for bonuses. Garcia added that Gile and David Becker, Head of Commodities Trading at Citicorp, understated the market risk and overstated the financial performance of Citibank’s commodity holdings that year. In March, Becker was sentenced to 15 months in prison.

Garcia said the defendants accomplished their scheme using various means, including inputting false data into computer models used to estimate the value of positions held by the commodity desk. Other false inputs were apparently made to artificially decrease the amount of risk being taken by the trading desk. The models therefore showed millions of dollars of artificially inflated profits for Citibank.

Citigroup, Merrill Lynch and Lehman Ex-Brokers Face Retrial in Eavesdropping Case

Published on: May 27, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Three former brokers of Citigroup, Merrill Lynch and Lehman Brothers face a second trial on charges they conspired to commit fraud by allowing day traders to eavesdrop on orders being discussed on investment firms’ internal “squawk boxes.” Four current and former executives at the day trading firm A. B. Watley Group will also be retried for their alleged roles in the scheme.

After a seven-week trail seven defendants including these former brokers were acquitted of securities fraud and other charges, but the jury deadlocked on the conspiracy charges opening the door to a retrial.

Prosecutors assert the brokers conspired to give Watley traders access to large orders broadcast over intercoms, or “squawk boxes”, in exchange for cash and commissions. The traders bought or sold stock ahead of the orders in anticipation of share-price swings, prosecutors say.

Citigroup Will Pay $200,000 in SEC Sanctions Connected to LMWW Auction Market Misconduct

Published on: May 16, 2007 | by Shepherd Smith Edwards & Kantas, LLP

Last week, Citigroup Global Markets Inc. said it would pay a $200,000 fine to settle charges by the Securities and Exchange Commission. The charges are connected to Leg Mason Wood Walker Inc’s allegedly improper interference with auction rate securities. Citigroup is LMWW’s merger successor.

According to the SEC, the penalty amount was determined based on LMWW’s willingness to cooperate, the “relatively small share of the auction rate securities markets,” and LMWW’s decision to report the allegedly illegal practices at a later time than did other broker-dealers from an earlier settlement.

During that related case, 15 broker-dealers-Citigroup included-said they would pay penalties of over $13 million related to charges that they participated in violative practices affecting the $200 billion auction rate securities market.