Why Robert Rubin and Citibank Execs Should Be in Deep Trouble

[depakid]

Former Citibank Chairman Robert Rubin knew about mounting subprime mortgage losses at his company, but still allowed executives to mislead to Citibank’s shareholders about those losses, according to the SEC. But that same agency wants to let Rubin off the hook for an offense that has sent others to jail, and which contributed directly to Citi’s epic taxpayer-funded bailout.

Those subprime losses were no small matter. Citi told its shareholders it had $13 billion in subprime exposure, when the actual figure was almost $40 billion higher. As the financial crisis deepened, Citi’s heavy involvement in the subprime business nearly destroyed the bank, propelling it into one of the ugliest bailouts of 2008. The new revelations about the depth of Rubin’s involvement in Citi’s subprime scam come from a damning court filing the SEC turned over on September 7, at the request of Federal Judge Ellen Huvelle, and reported by Joshua Gallu and William McQuillen for Bloomberg News. The SEC has been dragging its feet and pulling its punches on the Citi case, which appears to be one of the most straightforward examples of Wall Street fraud from the crash of 2008. The agency is still trying to prevent fraud charges from being filed against either Citi CEO Chuck Prince or Rubin, who served as Treasury Secretary under President Bill Clinton before raking in more than $120 million at Citi.

According to court documents, the SEC believes that all of Citi’s top officials knew exactly what was going on with the bank’s subprime accounting, and knew that the official line being fed to the public was bunk. Lying to your shareholders is a big, straightforward no-no in Corporate America—it’s considered securities fraud, subject to both hefty fines and jail time.

Thanks to the corporate reform laws Congress passed after the Enron debacle, every top executive at every significant U.S. corporation has to personally verify every accounting statement her corporation issues. That signature means that the executive is personally liable for the accuracy of those statements, and subject to criminal prosecution for egregious inaccuracies. But while the SEC has been forced to acknowledge that it believes every top official at Citi knew about the subprime scam, it is only seeking a slap on the wrist against two officials: CFO Gary Crittenden and former investor relations chief Arthur Tildsley.

Under a settlement proposed by the SEC, Crittenden faces the steepest penalty at $100,000. But in 2007 alone, the year the alleged impropriety took place, Crittenden took home $19.4 million. The fine amounts to about half of one percent of his income in a single year, a rounding error on a bonus.

In addition to ignoring big fish like Rubin, the SEC actually wants to fine Citi shareholders $75 million for having the audacity to be lied to.

More: http://blogs.alternet.org/speakeasy/2010/09/09/citibank-will-anyone-hold-prince-and-rubin-accountable/

[dkf]

1. This man was the architect of the Clinton economy.

Amazing.

[NC_Nurse]

2. So they're not going to prosecute anyone? The SEC sucks. Pathetic.

[Grinchie]

3. Makes me happy I left the economy after Enron.

I'm sure they don't miss me much, but I feel happy and can sleep at night knowing that these vultures aren't going to be picking any scraps off my labor.

Woeldn't it be great if everyone just two two weeks off and stayed home? No shopping, no work, no consumption..

[truedelphi]

5. Twenty two percent of us Americans are doing just that.

Though some of the twenty two percent are returning back to school, having gotten tired of staring at four walls 24/7.

[metapunditedgy]

4. We know they *should* be in trouble. The only important question is, why are they *NOT*?

I'm becoming convinced that the root of all evils in this country is the *people* who have amassed huge amounts of money. And the people who are all to willing to take their lobbying money.

When we're talking to children, we call it "selling your soul." When we're talking among adults, we often call it "being practical."

[depakid]

6. The fact that US attorney Jenny A. Durkan is crowing here:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4536144

Really does make a reasonable person wonder- and not only about priorities.

[metapunditedgy]

7. Have you seen how the SEC crows about every little slap on the wrist they give?

Enablement, thy name is SEC... they have basically formalized the principle that it's more profitable to commit fraud and pay the fine, than to do business legally.

[depakid]

8. Yep- and as many are "bean counters" themselves- they understand very well what they're doing

btw: Have any of the obviously corrupt (and/or incompetent) SEC officials who knew or had every reason to known about Madoff and Sanford been held accountable?

Nope.