Wednesday, May 26, 2010
FINRA Fines Citigroup $1.5 Million for Supervisory Failures Relating to Misappropriation of Cemeteries' Trust Funds
FINRA imposed a monetary sanction of $1.5 million against Citigroup Global Markets Inc. for supervisory violations relating to its handling of trust funds belonging to cemeteries in Michigan and Tennessee. The sanction represents a $750,000 fine and disgorgement of $750,000 in commissions, which is being returned to the cemetery trusts as partial restitution. Citigroup consented to findings that, from September 2004 through October 2006, Citigroup broker Mark Singer and two of his customers were involved in a scheme to misappropriate an amount alleged in various legal actions to be over $60 million in cemetery trust funds. One of Singer's customers, Clayton Smart, is currently facing criminal charges arising from the scheme in Tennessee and in Michigan. Singer's criminal trial in Tennessee recently ended in a mistrial. He still faces criminal charges in Indiana. Smart and the second customer, Craig Bush, have been named in civil litigation arising from the scheme.
FINRA's investigation showed that over a period of more than two years, Citigroup failed to reasonably supervise the handling of these accounts by inadequately responding to a succession of "red flags" – failures that permitted the scheme to continue undetected until October 2006. In settling these matters, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA's findings.