Tuesday, August 3, 2010
SEC Settles Charges Against Citigroup and Two Former Officers Involving Subprime Mortgage-Related Assets
The SEC and Citigroup Inc.settled charges that Citigroup misled investors about the extent of the company's exposure to sub-prime mortgage-related assets during 2007. According to the SEC, between July 20, 2007 and November 4, 2007, in response to intense investor interest in the topic, Citigroup repeatedly made misleading statements about the extent of its holdings of assets backed by sub-prime mortgages in earnings calls and public filings. Throughout the period in question, Citigroup represented that its sub-prime exposure in Citigroup's investment banking unit, Citi Markets & Banking, was $13 billion or less, when in fact, at all times during that period, the investment bank's sub-prime exposure was over $50 billion.
Citigroup agreed to pay a $75 million penalty to settle the SEC's charges.
Separately, the SEC also instituted settled cease-and-desist proceedings against Gary Crittenden, Citigroup's former chief financial officer, and Arthur Tildesley, Jr., Citigroup's former head of Investor Relations, for their roles in causing Citigroup to make certain of the misleading statements. Crittenden agreed to pay $100,000, and Tildesley agreed to pay $80,000.
New York Times columnist Andrew Ross Sorkin criticizes the settlement since the corporate fine essentially comes from the Citigroup shareholders.