Shareholder files friend-of-court brief, upsets sweetheart settlement between SEC and Citigroup

[Bozita]

Citigroup's Sweetheart Deal Flunks Smell Test: Jonathan Weil
By Jonathan Weil - Aug 18, 2010 9:00 PM ET


It turns out investors might have a voice after all when it comes to matters of fraud and punishment at the Securities and Exchange Commission. All they have to do, it seems, is ask.

That’s what lawyers for a Citigroup Inc. shareholder named Stanley Lerner soon found out after they filed a court brief complaining about the SEC’s sweetheart settlement agreement last month with the bank and two executives. The terms of the July 29 deal made no sense and let Citigroup’s officers and directors off too easy, Lerner’s attorneys told the federal judge presiding over the case.

The judge, Ellen S. Huvelle of the District of Columbia, proved to be a sympathetic ear. This week, Huvelle ordered the SEC to file a memo by Sept. 8 providing detailed answers to a litany of questions challenging the SEC’s handling of the case, many of which echoed Lerner’s objections.

The SEC accused Citigroup of committing negligent -- not intentional -- fraud when it told investors in 2007 that its risk of losses on subprime mortgages was $43 billion less than it actually was. (Negligent fraud: Now there’s an oxymoron.) The SEC proposed a $75 million fine, which would be borne by Citigroup shareholders. Those include the U.S. Treasury, which still owns an 18 percent stake in the twice-bailed-out bank.

more...

http://www.bloomberg.com/news/2010-08-19/citigroup-s-sweetheart-deal-flunks-smell-test-jonathan-weil.html