RandomGuy
10-19-2011, 01:19 PM
"I've got the best investment for you and your investment fund... that I am betting against."
Accused of Deception, Citi Agrees to Pay $285 Million
WASHINGTON — Citigroup agreed to pay $285 million to settle charges that it misled investors in a $1 billion derivatives deal tied to the United States housing market, then bet against investors as the housing market began to show signs of distress, the Securities and Exchange Commission said Wednesday.
The S.E.C. also brought charges against a Citigroup employee who was responsible for structuring the transaction, and brought and settled charges against the asset management unit of Credit Suisse and a Credit Suisse employee who also had responsibility for the derivative security.
The S.E.C. said that the $285 million would be returned to investors in the deal, a collateralized debt obligation known as Class V Funding III. The commission said that Citigroup exercised significant influence over the selection of $500 million of assets in the deal’s portfolio.
Citigroup then took a short position against those mortgage-related assets, an investment in which Citigroup would profit if the assets declined in value. The company did not disclose to the investors to whom it sold the collateralized debt obligation that it had helped to select the assets or that it was betting against them.
The S.E.C. also charged Brian Stoker, the Citigroup employee who was primarily responsible for putting together the deal, and Samir H. Bhatt, a Credit Suisse portfolio manager who was primarily responsible for the transaction. Credit Suisse served as the collateral manager for the C.D.O. transaction.
“The securities laws demand that investors receive more care and candor than Citigroup provided to these C.D.O. investors,” said Robert Khuzami, director of the S.E.C.’s division of enforcement. “Investors were not informed that Citigroup had decided to bet against them and had helped choose the assets that would determine who won or lost.”
Citigroup received fees of $34 million for structuring and marketing the transaction and realized net profits of at least $126 million from its short position. The $285 million settlement includes $160 million in disgorgement plus $30 million in prejudgment interest and a $95 million penalty, all of which will be returned to investors.
The companies and individuals who settled the charges neither admitted nor denied the charges.
In a statement, Citigroup said: “We are pleased to put this matter behind us and are focused on contributing to the economic recovery, serving our clients and growing responsibly. Since the crisis, we have bolstered our financial strength, overhauled the risk management function, significantly reduced risk on the balance sheet, and returned to the basics of banking.”
The settlement is subject to approval in the Federal District Court for the Southern District of New York, where the charges were filed.
They were just being "innovative"... in finding new ways to steal from small investors.
Can't fault that. It's capitalism, and as we all know capitalism doesn't need anybody protecting individuals from large corporations. I mean its an even fight, right?
Accused of Deception, Citi Agrees to Pay $285 Million
WASHINGTON — Citigroup agreed to pay $285 million to settle charges that it misled investors in a $1 billion derivatives deal tied to the United States housing market, then bet against investors as the housing market began to show signs of distress, the Securities and Exchange Commission said Wednesday.
The S.E.C. also brought charges against a Citigroup employee who was responsible for structuring the transaction, and brought and settled charges against the asset management unit of Credit Suisse and a Credit Suisse employee who also had responsibility for the derivative security.
The S.E.C. said that the $285 million would be returned to investors in the deal, a collateralized debt obligation known as Class V Funding III. The commission said that Citigroup exercised significant influence over the selection of $500 million of assets in the deal’s portfolio.
Citigroup then took a short position against those mortgage-related assets, an investment in which Citigroup would profit if the assets declined in value. The company did not disclose to the investors to whom it sold the collateralized debt obligation that it had helped to select the assets or that it was betting against them.
The S.E.C. also charged Brian Stoker, the Citigroup employee who was primarily responsible for putting together the deal, and Samir H. Bhatt, a Credit Suisse portfolio manager who was primarily responsible for the transaction. Credit Suisse served as the collateral manager for the C.D.O. transaction.
“The securities laws demand that investors receive more care and candor than Citigroup provided to these C.D.O. investors,” said Robert Khuzami, director of the S.E.C.’s division of enforcement. “Investors were not informed that Citigroup had decided to bet against them and had helped choose the assets that would determine who won or lost.”
Citigroup received fees of $34 million for structuring and marketing the transaction and realized net profits of at least $126 million from its short position. The $285 million settlement includes $160 million in disgorgement plus $30 million in prejudgment interest and a $95 million penalty, all of which will be returned to investors.
The companies and individuals who settled the charges neither admitted nor denied the charges.
In a statement, Citigroup said: “We are pleased to put this matter behind us and are focused on contributing to the economic recovery, serving our clients and growing responsibly. Since the crisis, we have bolstered our financial strength, overhauled the risk management function, significantly reduced risk on the balance sheet, and returned to the basics of banking.”
The settlement is subject to approval in the Federal District Court for the Southern District of New York, where the charges were filed.
They were just being "innovative"... in finding new ways to steal from small investors.
Can't fault that. It's capitalism, and as we all know capitalism doesn't need anybody protecting individuals from large corporations. I mean its an even fight, right?