May 6, 2009

Ex-Citigroup Banker Among Six Defendants the SEC is Charging with $6 Million Insider Trading Scam

Last week, the Securities and Exchange Commission charged six people, including ex-Citigroup Global Markets’ investment banker Maher Kara and his brother Michael Kara, with taking part in a multimillion-dollar insider trading investment scam that involved tipping others about upcoming merger deals. The Karas were indicted in a California district court. Other defendants include Zahi Haddad, Emile Jilwan, Karim Bayyouk, and Bassam Salman. Except for Salman, all of them allegedly made between $82,000 to $2.3 million, with Maher Kara making over $1.5 million. The SEC wants to the defendants to pay fines, disgorgement, and other relief.

The SEC says that from at least April 2004 to April 2007, Maher Kara told his brother on numerous occasions about deals that were pending involving Citigroup clients in the health care industry. Michael Cara would then buy options and stock in at least 20 companies involved in the Citigroup deals and would give the information to relatives and friends in Illinois and California who would also trade before the deals occurred.

Scam participants reportedly made the most money from trading in Biosite right before an announcement was made in March 2007 that the medical testing company was being acquired. Following the public disclosure, stock price in Biosite increased by more than 50% and Michael Kara and six tippees allegedly made over $5 million in illegal profits.

Two other tippees have agreed to disgorge their illegal profits to settle the SEC allegations. Nasser Mardini disgorged $291,000, while Joseph Azar disgorged $118,000 and will pay a fine. Both are not denying or admitting wrongdoing by settling.

Related Web Resources:
SEC charges former Citi banker with insider trading, Reuters, April 30, 2009

SEC Charges Wall Street Investment Banker and Seven Others in Widespread Insider Trading Scheme, SEC.gov, April 30, 2009

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Posted In: Citigroup , Financial Firms , Insider Trading

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April 26, 2009

Wachovia and Citigroup Settle Michigan ARS Case for $880 Million

Wachovia Capital Markets LLC and Citigroup Global Markets Inc. will settle allegations by the Michigan Office of Financial and Insurance Regulation that the firms misled investors who bought auction rate securities by paying a combined $880.3 million—$717 million for Citigroup and $159 million for Wachovia—to reimburse clients. The OFIR says the firms misled clients into thinking ARS were liquid like cash and were surprised when the market collapsed, freezing their assets. OFIR claims the securities were sold and marketed as if they were conservative investment and that the firms did not give investors information about the risks involved.

Both firms will also pay $2.3 million to Michigan to resolve the ARS charges. Citigroup will pay $1.72 million per an administrative consent order and Wachovia will pay $654,000. According to OFIR, 90% of the funds will be placed in a general fund for the state, while the rest will go to the Michigan Investor Protection Trust for consumer education about a number of issues, including investment fraud.

Just this March, Wachovia and Citigroup said they would pay back California investors over $4.7 billion after the investment firms were accused of misleading investors about investing in ARS. Also last month, the North American Securities Administrators Association set up a Web site so investors could find out how to file arbitration claims for damages stemming from ARS losses.

Citigroup, Wachovia in $876M Mich. ARS Buyback, The Bond Buyer, April 17, 2009

Michigan regulators detail settlement with Citigroup, Wachovia over auction rate securities, Associated Press, April 16, 2009


Related Web Resources:
North American Securities Administrators Association

Michigan Office of Financial and Insurance Regulation

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Posted In: Citigroup , Financial Firms , Wachovia

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April 17, 2009

Magistrate Judge Tells Texas Court that Citigroup Global Markets Holding Inc. Should Not Be Denied Arbitration Award for Unpaid Promissory Note

The US District Court for the Western District of Texas should confirm an arbitration award for brokerage firm Citigroup Global Markets Holding Inc. against a former employee who failed to pay his promissory note—so says magistrate judge Nancy Stein Nowak.

Nowak argued before the Texas court that even if “equitable reasons” exist for why stockbroker Ernest Elam shouldn’t pay the brokerage firm the money he owes for the note, the arbitrator's decision must still be upheld because the former Citigroup broker failed to provide a reason for why he shouldn't pay that falls under the Federal Arbitration Act.

Last July, the arbitration panel found in favor of Smith Barney and Elam was told to pay the investment firm $193,484.28, $15,768.70 in legal fees, and 5% interest per annum for any balance that is not paid. In turn, Elam asked for the award to be vacated because he claims that:

• The promissory note was a forgivable lone.
• He was misled about repayment requirements.
• Smith Barney sought repayment because the broker’s departure caused the branch manager’s end of the year bonus to go down.
• Smith Barney benefits financially from commissions through Elam’s previous clients.

According to Nowak, Citigroup Global Markets Holdings Inc. and Citigroup Global Markets Inc. (as Smith Barney) had asked for confirmation of the award against Elam for the 2004 note he defaulted on in the original principal amount of $270,878. The magistrate judge says that according to the FAA, an arbitration award can only be vacated if:

• The award was obtained through fraud, corruption, or undue measures.
• The arbitrators were at least partially corrupt or engaged in misconduct or went beyond the scope of their powers.

Therefore, Novak contends that the district court cannot vacate the award and should grant Smith Barney’s motion.

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Posted In: Arbitration , Citigroup , Financial Firms , Texas Securities Fraud

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March 5, 2009

Wells Fargo, Goldman Sachs, JP Morgan Chase, Citigroup, UBS Securities, Bank of America, Moody’s Investment Services, and Fitch Ratings are Among Defendants Sued On Behalf of Wells Fargo Certificate Investors for Alleged Securities Fraud Violations

The Boilermaker-Blacksmith National Pension Trust is suing a number of investment banks, credit rating agencies, and underwriters, including Wells Fargo, WFASC, Morgan Stanley & Co., Credit Suisse Securities (USA) LLC, Barclays Capital Inc., Bear Stearns & Co., Countrywide Securities Corp., Deutsche Bank Securities Inc., JPMorgan Chase Inc., Bank of America Corp., Citigroup Global Markets Inc., McGraw-Hill Cos., Moody's Investor Services Inc., and Fitch Ratings Inc., over allegations that they made false statements in the prospectus and registration statement for certificates that were collateralized by Wells Fargo Bank, NA. The lawsuit, filed on behalf of thousands of investors that bought the certificates from Wells Fargo Asset Securities Corp., accuses the defendants of violating the 1933 Securities Act by engaging in these alleged actions.

According to the securities fraud lawsuit, the defendants concealed from investors that Wells Fargo revised its underwriting practices in 2005 and became involved in high risk subprime mortgage lending. The complaint contends that WFASC and a number of defendants submitted to the Securities and Exchange Commision prospectus and registration statements representing that the mortgages were backed by certificates that were subject to specific underwriting guidelines for evaluating a borrower's creditworthiness. The plaintiffs contend that these prospectuses and registration statements were false because they neglected to reveal that the Wells Fargo-originated certificates were not in accordance with the credit, underwriting, and appraisal standards that Wells Fargo, per the companies, had supposedly used to approve mortgages.

The lawsuit also claims that because Wells Fargo decided to enter the subprime mortgage mortgage market in 2005, the investment bank had to take significant write-downs in 2008 because of its massive exposure to the subprime market and the WFASC certificates that these mortgages backed dropped significantly in value. The Boiler-Blaksmith fund reports that it lost about $5 million, which is more than half of what it invested.

Related Web Resources:
Read the Complaint

The Boilermakers National Funds

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Posted In: Bank of America , Broker Fraud , Citigroup , Credit Ratings Agencies , Credit Suisse , Deutsche Bank , Financial Firms , Fitch , J P Morgan - Chase , Moody's , Morgan Stanley

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February 26, 2009

Bank of America, Citigroup, Goldman Sachs, and Wells Fargo Chief Executives Among Those Defending Bailout Fund Use

Earlier this month, the chief executives of the eight biggest banks in the United States, including Citigroup, Bank of America, Wells Fargo, and Goldman Sachs addressed the House Financial Services Committee in an attempt to persuade US lawmakers that billions of dollars in bailout funds were used as intended—to increase consumer and business lending and improve balance sheets. The banking heads also admitted to certain mistakes and promised that compensation in the future would be commensurate with performance.

Under the Capital Purchase Program, the federal government gave the banks $125 billion in cash infusions in November. Bank of America and Citigroup also received $20 billion each in Treasury investments.

At the session, some of the bank executives gave testimony regarding activities performed since they received the government’s financial assistance. For example, Kenneth Lewis, Bank of America’s chief executive, says that during 2008’s fourth quarter, the bank committed to $115 billion in new loans.

Vikram Pandit, Citigroup’s chief executive, said his bank had provided $75 billion in new loans for the fourth quarter. He also said that Citigroup had used $36.5 billion to expand personal loans, mortgages, and credit lines for businesses, families, and individuals, as well as to create secondary market liquidity. He said Citigroup had cancelled an order for a $50 million jet.

While the executives were contrite, Committee Chairman Barney Frank criticized them for giving executives bonuses, in addition to salaries. Lawmakers also asked the banks’ executives to stop home foreclosures until the Obama Administration can executive a $50 billion plan on mortgage modifications and other assistance for borrowers that are experiencing problems.

John Stumpf, Wells Fargo's chief executive, said that his bank could hold off on foreclosing on loans in which it is the investor or owner. Pandit said Citigroup could support a moratorium for borrowers that live on properties facing foreclosure. Lewis said Bank of America could place a moratorium on home foreclosure for two or three weeks.

Related Web Resources:
Foreclosures halt by Bank of America, Citigroup, JPMorgan, Wells Fargo, UB-News.com, February 14, 2009

Fed Urges Banks to Put Bailout Funds Into Loans, Not Dividends, Bloomberg.com, February 24, 2009

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Posted In: Bank of America , Citigroup , Financial Firms , Goldman Sachs , Wells Fargo

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December 22, 2008

UBS and Citigroup to Pay Nearly $30 Billion to Tens of Thousands of ARS Investors

UBS Financial Services, Inc., UBS Securities, LLC, and Citigroup have reached finalized settlements with the Securities and Exchange Commission to pay tens of thousands of ARS investors almost $30 billion. The settlements will resolve SEC charges that the companies misled investors about the risks involved with auction rate securities.

The SEC’s complaint accused UBS and Citigroup of misleading customers by telling them ARS were liquid, safe investments and failing to warn them of the growing dangers when the market started to fail. When the ARS market froze in February, the SEC says both firms left tens of thousands of clients holding billions of dollars in illiquid ARS.

These finalized settlements will restore about $22.7 billion in liquidity to UBS clients who invested in ARS and some $7 billion to Citigroup investors. SEC Chairman Christopher Cox says investors will get back “100 cents on the dollar on their ARS investments.” Both firms will buy ARS from affected customers at PAR. Customers that sold their ARS under the par difference will be paid between par and the ARS sale price. This is the largest settlement in SEC history.

UBS and Citigroup are not admitting to or denying the SEC’s allegations by agreeing to settle. Both investment firms, however, have agreed to enjoinment from future violations.

The U.S. District Court for the Southern District of New York still needs to approve the settlements, and additional SEC penalties could still arise for UBS and Citi. The SEC is also waiting to finalize the settlements-in-principle it reached with Merrill Lynch, Bank of America, Wachovia, and RBC Capital Markets.

Related Web Resources:
SEC Finalizes ARS Settlements With Citigroup And UBS, Providing Nearly $30 Billion in Liquidity to Investors, SEC, December 11, 2008

SEC Complaint Against UBS (PDF)

SEC Complaint Against Citigroup (PDF)

Continue reading "UBS and Citigroup to Pay Nearly $30 Billion to Tens of Thousands of ARS Investors" »

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Posted In: Auction-Rate Securities , Citigroup , Financial Firms , SEC , UBS

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November 19, 2008

NASAA Says Investors with Frozen Auction-Rate Securities Should Ask Investment Firms About Buyback Opportunities

The North American Securities Administrators Association is reminding investors to ask the investment firms that sold them any now-frozen auction-rate securities about repurchase opportunities. Following the ARS market collapse, securities regulators in 12 US states joined together to form a multi-state Task Force dedicated to finding out whether Wall Street investment firms had misled investors when persuading them to invest in the ARS market.

As part of their settlement agreements reached with the firms in question, 11 major Wall Street investment banks have said they will buy back over $51 billion in ARS from charities, retail investors, and small companies. However, these repurchase offers may not be available indefinitely.

NASAA President Fred Joseph says the best way to avail of any redemption offers is to contact the investment firms as soon as possible. So far, 11 firms have agreed in principle to buy back over $50 billion in ARS. NASAA says additional repurchase opportunities are expected to become available in the coming months.

Investment Firms with ARS Hotlines:

Bank of America 1-866-638-4183
Deutsche Bank 1-866-926-1437
Citi 1-866-720-4802
JP Morgan 1-866-450-8470
Goldman Sachs 1-888-350-2857
Merrill Lynch 1-888-706-1381
UBS 1-800-253-1974
Morgan Stanley 1-800-566-2273
Wachovia 1-866-283-794

Meantime, more investigations are under way into the sales practices of US firms that marketed and sold auction-rate securities to investors. Unfortunately, many investors who were told ARS were liquid investments are now dealing with frozen securities and cannot access their funds.

If you invested in the auction-rate securities industry and your ARS became frozen during the market’s collapse, you may be the victim of securities fraud.


Related Web Resources:
State Securities Regulators Remind Auction Rate Securities Investors to Contact Firms About Buyback Offers, NASAA, November 17, 2008

Small firms caught in ARS buyback vise, November 16, 2008

Continue reading "NASAA Says Investors with Frozen Auction-Rate Securities Should Ask Investment Firms About Buyback Opportunities" »

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Posted In: Auction-Rate Securities , Bank of America , Citigroup , Deutsche Bank , Financial Firms , Goldman Sachs , J P Morgan - Chase , Merrill Lynch , Morgan Stanley , NASAA , UBS , Wachovia

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November 17, 2008

Citigroup Global Markets Ordered to Pay FINRA Fine for Inadequate Supervision

The Financial Industry Regulatory Authority Inc. says it is fining Citigroup Global Markets Inc. $300,000 for its failure to reasonably supervise the commissions that clients were charged for stock and options trades. Citigroup Global Markets is Citigroup Inc’s brokerage and securities arm.

FINRA says that between April 2002 and January 2006, then-Citigroup representative Juan Carlos Hernandez charged 27 clients unreasonable commissions that substantially exceeded the firm’s calculated rate for appropriate charges. One client was reportedly overcharged about $1.2 million.

Citigroup let Hernandez go in February 2006 and one month later, without admitting to or denying FINRA charges, he consented to the findings made against him and was barred by FINRA.

FINRA contends that Hernandez was able to overcharge clients because Citigroup neglected to properly supervise him. FINRA also found that it wasn't until October 2007 that Citigroup told its brokers about its calculated commission rates or that they weren’t allowed to charge commissions higher than these rates. In the cases when commissions were greater than Citigroup’s calculated rates, FINRA says the firm lacked the proper procedures and policies for determining whether a commission was inappropriate.

By agreeing to settle, Citigroup is consenting to FINRA’s findings but is not admitting or denying the charges. The firm offered to reimburse customers who were affected.

Related Web Resources:
Citigroup Global Markets Fined $300,000 for Failing to Supervise Commissions Charged to Customers on Stock and Option Trades, Marketwatch, November 13, 2008

Citigroup fined $300,000 for commission charges, AP, November 13, 2008

Continue reading "Citigroup Global Markets Ordered to Pay FINRA Fine for Inadequate Supervision" »

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Posted In: Citigroup , FINRA , Financial Firms

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July 25, 2008

Judge Approves Citigroup Falcon Fund Investors’ Decision to Withdraw Lawsuit

In New York, a judge has approved the decision by investors of a Citigroup Falcon Fund to drop their lawsuit asking for more data about how the bank plans to liquidate the fund.

On February 22, Citigroup announced it was providing the Falcon Funds a $500 million line of credit and consolidating $10 billion in liabilities and assets.
Citigroup began suspending distributions and redeptions and started closing down the fund in March. The fund’s value dropped by 80% and Citigroup offered to pay investors 45 cents for every dollar.

The investors had been asked to tender shares of Falcon Strategies Two LLC, but they wanted corrections made to the offering memo because misleading and missing information made it impossible for them to value their stakes. U.S. District Judge Sidney Stein, who this week approved the withdrawal of the investors' class action suit, rejected their motion to push forward the lawsuit about the tender offer. He said the plaintiffs were trying to turn the securities laws' anti-fraud provisions into provisions of broad disclosure.

The Falcon Funds mainly invested in fixed-income securities and other debt instruments, and they may have been exposed to weaknesses in the mortgage, credit, and bond markets. Citigroup brokers are accused of recommending the funds to investors looking for conservative investments when, in fact, the funds may have been accompanied by a high level of risk.

Related Web Resources:

The Law Firm of Shepherd, Smith, Edwards & Kantas LLP Investigates Losses in Falcon Hedge Funds, Primenewswire.com, July 2, 2008

Citigroup Alternative Investments LLC : Falcon Strategies Two B LLC Hedge Fund, Stanford Law School

Continue reading "Judge Approves Citigroup Falcon Fund Investors’ Decision to Withdraw Lawsuit" »

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Posted In: Citigroup , Class Action Lawsuits

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July 2, 2008

Citigroup’s Smith Barney Draws Ire of Investors and Its Own Brokers Over ASTA/MAT and Falcon Funds

Citigroup is offering to cover some of the losses of investors involved with certain hedge funds sold by the firm’s Smith Barney brokerage unit. Citigroup and Smith Barney brokers allegedly recommended the funds, ASTA/MAT and Falcon, to investors looking for conservative investments.

Citigroup marketed the hedge funds as being ideal for retirees and other investors seeking safe investments, and Smith Barney raised hundreds of millions of dollars for the funds. The funds were reportedly marketed to investors as low-risk and accompanied by only a minimal probability of loss when, in fact, they came with high levels of risk—information that was kept from investors.

Last year, Citigroup told Smith Barney and Citigroup bankers to market the funds to their best clients. These clients were not informed that the new pitch initiative was an effort to inject new funds into Falcon, which had dropped by over 10%. The fund would be worth 25% of its original value by the end of March 2008.

In February, Citigroup disclosed to the SEC that it gave the Falcon funds a $500 million line of credit. The firm later said it would consolidate the funds’ $10 billion in assets and liabilities on its balance sheet. Citigroup said it would reimburse investors for part of their losses.

However, critics say that this complex partial compensation plan will allow each investor to get back about 25 cents for every dollar invested—only 28% of their losses. Smith Barney brokers have also voiced concerns that the plan is designed to give customers just enough so they won’t file lawsuits.

Last week, our securities fraud law firm announced that we are investigating claims for investors that lost money in Falcon and ASTA/MAT hedge funds. Any investors that accept Citigroup’s offers will forfeit their right to file a lawsuit against the company, so why not schedule a free consultation with our stockbroker fraud law firm for a free consultation to explore your legal options first? Contact Shepherd Smith Edwards and Kantas LLP today.


Related Web Resources:

The Law Firm of Shepherd, Smith, Edwards & Kantas LLP Investigates Losses in Falcon Hedge Funds, Primenewswire.com, July 2, 2008

Citigroup Acts to Bolster Hedge Funds, New York Times, March 11, 2008

Citigroup Smith Barney

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Posted In: Citigroup , Smith Barney - Citigroup

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June 25, 2008

Citigroup Settles Securities and Exchange Commission Charges Over Accounting Issues Related to Argentine Bonds

Without admitting to our denying any wrongdoing, Citigroup has agreed to settle Securities and Exchange Commission charges that it took part in improper accounting related to specific Argentine bonds. According to the SEC, Citigroup was able to avoid paying another $479 million in pre-tax charges during the 4th quarter of 2001.

Citigroup became affected by Argentina’s economic and political problems because the bank owns Argentine government bonds and over $1 billion in Argentine-related consumer loans. Because of the crisis, the South American country’s government had to default on certain sovereign debt obligations and devalue the country’s currency.

Citibank had to make several accounting decisions, including those involving Argentine government bonds that were not eligible for bond swap, government-sponsored exchanges involving bonds for loans, the sale of Banco Bansud S.A. (a bank subsidiary that Citigroup had acquired), and the result of government actions that lead to the conversion of $1 billion in Citigroup loans to Argentine pesos.

The SEC says that Citigroup dealt with these areas in a way that did not adhere to generally accepted accounting principals, and, as a result, the bank overstated its income, which allowed it to exceed its earning expectations. Conforming to GAAP would have decreased its earnings during the 2001 4th quarter by over 8%. The SEC is also accusing Citigroup of engaging in record-keeping, reporting, and internal accounting violations of the Securities and Exchange Act.

Citigroup is not being fined, but it has agreed to cease and desist from violating securities laws in the future as part of its settlement of the charges.

If you are someone that has suffered financial losses because of the misconduct or negligence of a broker-dealer, an investment bank, or another member of the securities industry, contact Shepherd Smith Edwards & Kantas, LLP today.


Related Web Resources:

Citigroup Settles Probe of Argentine Bond Accounting, Bloomberg.com, June 16, 2008

SEC Orders Citigroup To Stick To GAAP, Stanford.edu, June 17, 2008

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Posted In: Citigroup

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March 12, 2008

Countrywide Financial, Merrill Lynch, and Citigroup Executives Defend Their Hefty Compensations Following Subprime Mortgage Crisis

Appearing before the U.S. Congress last week, Countrywide Financial CEO and founder Angelo Mozilo, Ex-Citigroup CEO Charles Prince, and Ex-Merrill Lynch Chairman and CEO Stanley O’Neil gave their testimonies to the House Committee on Government and Oversight Reform.

The three men say that reports about their compensation are “grossly exaggerated” and that they too have lost millions of dollars from the mortgage debacle. On Thursday, the Congressional issued a report stating that the three men earned $460 million between 2002 and 2006.

All three men say their income from the firms are tied to the profits that the companies made in the years prior to the mortgage crisis and that their company stock has dropped dramatically since then.

Mozilo reportedly stood to earn $115 after Countrywide’s pending sale to Bank of America is completed. He now has agreed to forfeit $37.5 million.

O’Neal received $161 million after stepping down from Merrill Lynch. Prince left Citigroup last November with about $68 million.

Other Wall Street CEO’s that have generated media buzz for their generous compensations:

-Last year, Goldman Sachs Chairman and CEO Lloyd Blankenfein received $68 million—the largest bonus ever for an industry head.

-Robert Nardelli, Chrysler Chairman and CEO, took away $210 million in stock options, money, and retirement benefits after being asked to leave Home Depot.

In 2006, 386 Fortune 500 firm chiefs received $10.8 million in compensation.

Shepherd Smith and Edwards represents stockbroker fraud clients that have lost money because of the negligence or misconduct of a member of a securities industry. One of our securities fraud lawyers can discuss your case during a free consultation.


Related Web Resources:

Mortgage mess CEOs defend pay, CNN Money.com, March 7, 2008

Congress quizzes financial execs on CEO pay 'lottery', USA Today, March 7, 2008

Committee Holds Hearing on CEO Pay and the Mortgage Crisis, House Committee on Government and Oversight Reform

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Posted In: Citigroup , Countrywide Financial , Morgan Stanley , Subprime Mortgage

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December 23, 2007

Citibank and Columbia University Sued for Charging College Students Extremely High Interest Rates on School Loans

A former Columbia University student is suing Citibank and Columbia University for what he is calling “modern-day slavery,” for allegedly colluding to charge unreasonably high interest rates on student loans.

Brian Baxter, 57, is now a licensed psychotherapist and a social worker. He graduated from Columbia University in the 1990’s with a BA in sociology and a master’s in social work. Baxter says that he is still paying back the interest on his student loan even though it has been 10 years since he graduated.

He says that his $65,000 loan has turned into $172,000. Creditors take 15% of his paycheck regularly. Baxter says he will likely spend the rest of his life paying back his debt.

Baxter is accusing Columbia of guiding him toward Citibank, the school’s preferred lender and is calling the alleged collusion an act of “modern-day slavery.” He says he filed the lawsuit on behalf of all first-generation, low-income college students.

New York Attorney General Andrew Cuomo is investigating the lending practices of universities and colleges. So far, 63 U.S. colleges and universities have been named as having misled students who applied for student loans. Over 25 schools and at least 12 lenders have reached settlement agreements collectively valued at $13.7 million. Other lawsuits are pending. Students have been repaid $3.4 million.

Governor Cuomo is examining whether school officials received kickbacks for encouraging students to sign up with certain lenders. There is evidence that allegedly shows how schools, lenders, and financial officers benefited from certain arrangements that ended up costing students money. Some schools supposedly have a “preferred-lender” list, while others have exclusive “preferred-lender” deals. Other evidence revealed that some loan companies have school financial aid officers on their boards.

Shepherd Smith and Edwards represents clients who have been financially taken advantage of by a member of the securities industry. Faiilure to disclose conflicts of interest is inappropriate and wrong. Contact Shepherd Smith and Edwards and ask for your free consultation.


Related Web Resources:

Columbia and Citibank 'Modern Day Slavers' Suit, New York Post, December 17, 2007

Columbia U., Citibank sued for 'slavery', UPI.com, December 17, 2007

Cuomo: School loan corruption widespread, USA Today

New York State Attorney General Mario Cuomo

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Posted In: Citigroup

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October 21, 2007

HSBC Securities, Citigroup Global Markets Inc., UBS Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Inc., and Interactive Brokers LLC Among Firms Disciplined by NYSER

The New York Stock Exchange Regulation Inc. is disciplining nine companies and eight people for numerous violation. The firms disciplined include:

Merrill Lynch, Pierce, Fenner & Smith: Fined $100,000 for violating rule 123c about 480 times when it cancelled or submitted securities orders after the mandatory cutoff period.

Citigroup Global markets Inc: Find $300,000—half of this to be payed to NASDAQ; the other half to be paid to NYSE. The firm made inaccurate reports about short interest positions in securities that were listed on the NYSE.

Interactive Brokers LLC: Fined $250,000. The firm was fined for violations related to day-trading minimum balances.

HSBC Securities (USA) Inc.: Fined $500,000. Over a several year period, the firm recommended and sold CDs that were not appropriate for their targeted 1900 investors. The firm allegedly engaged in misrepresentations and withheld risks during these transactions.

UBS Securities LLC: Fined $150,000. The firm did not make disclosures in its published research reports about investment baking relationships and non-investment-banking connected compensation.

Eight individuals were also fined for numerous violations, including former securities specialist Freddie DeBoer, broker Stephen Mara, and Adam Lazarus.

DeBoer was fined $300,000 and was permanently barred because he intentionally defrauded customers involved in the sale or purchase of securities. Lazarus was barred for 30 months because of short term purchases sales that were “unauthorized and unsuitable” and involved four customer accounts. Mara was suspended for two weeks and censured because of his involvement in a “physical altercation” on the exchange floor

A number of other people were permanently barred because they failed to reveal that they had criminal records and for recordkeeping violations.

NYSE Regulation can discipline brokerage firms and brokers for broker misconduct. However, you if you want to recover any investments you may have lost because of the illegal actions of any member of the securities industry, your best bet is to retain the services of an experienced stockbroker fraud attorney. Over the years, Shepherd Smith and Edwards has recovered the losses of thousands of investors throughout the United States. Let us help you.

Contact Shepherd Smith and Edwards today and ask for your free consultation.


Related Web Resources:

NYSE Regulation

HSBC Securities

Merrill Lynch

Citigroup

Interactive Brokers

UBS Securities

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Posted In: Citigroup , HSBC Securities , Interactive Brokers LLC , Merrill Lynch , NYSER , UBS

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October 9, 2007

Citigroup, Lehman Brothers, DeutscheBank and other Firms Fined for Failing to Deliver Trade Confirmations.

NYSE Regulation fined 14 of its member firms a total of $10.4 million in fines for failing to deliver trade confirmations to their clients and other violations.

Citigroup Global Markets received the heaviest fine of $2.25 million for failing to deliver trade confirmation documents in more than a million consumer transactions. Lehman Brothers and DeutscheBank were each fined $1.25 million.

Other firms sanctioned included UBS Securities; Bear Stearns & Co.; Credit Suisse Securities (USA) LLC ; Banc of America Securities LLC; Goldman Sachs & Co.; JP Morgan Securities; Wachovia Capital Markets LLC; and Keefe, Bruyette & Woods Inc. Fines levied against these firms ranged from $375,000 to $800,000.

According to the New York Stock Exchange (NYSE) enforcement wing, the violations occurred between July 1, 2003 and Oct 31, 2004. These include failures to ensure delivery of prospectuses to customers who purchased securities and mutual funds, failure to deliver product descriptions to customers purchasing exchange traded funds and failure to establish and maintain appropriate supervisory procedures regarding such activities.

Each of the member firms also agreed to certify that its current policies and procedures are reasonably designed to ensure compliance with current federal securities laws and regulations regarding such requirements. This action was one of the final acts by the regulatory staff of the NYSE prior joining the Financial Industry Regulatory Authority (FINRA) which has taken over all former NASD and NYSE regulatory responsibilities.

Shepherd Smith and Edwards represents investors nationwide in claims against securities firms. We have represented investors in more than 1,000 securities cases. To learn whether we may be able to assist you with a claim contact us to arrange a free consultation with one of our attorneys.


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Posted In: Bank of America , Bear Stearns , Citigroup , Credit Suisse , Deutsche Bank , Goldman Sachs , J P Morgan - Chase , Stockbroker Regulation , UBS , Wachovia

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July 24, 2007

Citigroup's Smith Barney Unit Ordered to Pay $50 Million over Widespread Fraud Charges

In one of its final regulatory acts before being folded into the NASD, the New York Stock Exchange’s regulatory unit has censured and fined Smith Barney $50 million over illegal trades, failures to supervise and record-keeping violations. The firm agreed to the sanctions without admitting or denying the charges.

The Smith Barney unit of Citigroup Global Markets Inc. will pay a fine of $10 million to the NYSE, and a fine of $5 million to the State of New Jersey, related to a "separate regulatory matter arising out of the same conduct." An additional $35 million will be paid into a restitution fund to compensate victims.

The NYSE regulators say Smith Barney agreed to these huge sanctions to resolve charges related to a variety of fraudulent trading activities, including excessive trading, improper trading in mutual fund shares, improper trading in variable annuity mutual fund sub-accounts, illegal market timing trades, plus the firm’s failures to supervise and to maintain adequate books and records.

The market timing charges also included deceptive acts to conceal the identities of the brokers involved as well as their customers, said the NYSE adding that, during a two year period, Citigroup financial consultants engaged in 250,000 market timing trades, generating approximately $32.5 million in gross revenues.

Shepherd Smith and Edwards represents investors nationwide in claims against members of the securities industry. We have helped numerous clients to recover in claims against both Smith Barney and Citicorp. To learn whether we can also assist you to recover contact us to arrange a free consultation with one of our attorneys.

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Posted In: Citigroup , Smith Barney - Citigroup , Stockbroker Regulation

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June 18, 2007

NASD Says Citigroup To Pay $15.2 Million For Misleading BellSouth Retirees

Citigroup Global Markets Inc is being charged $3 million by NASD to settle charges connected to misleading materials it allegedly gave Bellsouth employees during retirement meetings and seminars held in North Carolina and South Carolina. NASD also says that Citigroup has to pay over 200 ex-Bellsouth employees $12.2 million in restitution. The latter comes came from a civil class action involving Smith Barney, which had tried to get the case dismissed under SLUSA.

NASD says that Citigroup neglected to properly supervise certain brokers located in Charlotte, North Carolina that used the misleading sales materials during numerous meetings with BellSouth Corp. employees. The materials made “exaggerated and unwarranted projections of future earnings” and did not elaborate on the related risks of making certain investments.

Following these presentations, over 400 BellSouth employees opened more than 1100 accounts via these brokers. Many of their investors had retired early from BellSouth and had less than $350,000 in savings. Many of them cashed out their 401(k) accounts and pensions and invested these funds with the Citigroup brokers.

Also disciplined by the NASD:

*Jeffrey Sweitzer, who developed the sales campaigns, directed many of these seminars, drafted the misleading materials, and managed the brokers. He suspended for 18-months and ordered to pay a $125,000 fine.

*Matthew Muller was suspended for $9 months and ordered to pay $50,000 for his participation in numerous seminars and in-person meetings.

*Joseph Zentner received a 30-day suspension and was fined $30,000 for helping Sweitzer prepare some of the misleading materials.

All three men are being ordered to complete 40 hours of training on complying with federal securities laws and NASD rules.

*Randall Matz, a branch office manager, was suspended from his supervisory role for 90 days and fined $60,000.

*Elizabeth Harris, a branch operations manager, was also suspended from acting as a supervisor for 45 days. She is being ordered by NASD pay a $30,000 fine. Both must pass an NASD Qualification Exam before they can return to these roles.

All parties, including Citigroup, agreed to the suspensions and fines without admitting to or denying the charges.

Shepherd Smith and Edwards has represented many former employees of telephone companies with similar complaints against various brokerage firms. We have an excellent track record for helping these investors recover their losses. If you are an investor who has lost money because of the misconduct of broker-dealers or anyone else in the securities industry, contact Shepherd Smith and Edwards to schedule your free consultation.

Related Web Resources:

Citigroup to pay $15.2 million for misleading retirees, Reuters, June 6, 2007

Citigroup Global Markets to Pay Over $15 Million to Settle Charges Relating to Misleading Documents and Inadequate Disclosure in Retirement Seminars, Meetings for BellSouth Employees, P.R. Newswire

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Posted In: Citigroup , Smith Barney - Citigroup

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May 30, 2007

Former Head of Commodity Trading and Head Trader at Citibank Both Jailed for Inflating Profits

After his former boss was sentenced, a former head of American trading on the Citibank NA commodity desk was sentenced in May to 12 months and a day in prison and ordered to pay approximately $188,000 after pleading guilty to conspiring to falsify bank records and to commit wire fraud, said a U.S. Attorney for the Southern District of New York.

U.S. Attorney Michael Garcia said Charles Craig Gile schemed to inflate trading profits of the Citibank commodity desk by as much as $20 million during 2003 to increase his stature at the firm and make himself eligible for bonuses. Garcia added that Gile and David Becker, Head of Commodities Trading at Citicorp, understated the market risk and overstated the financial performance of Citibank's commodity holdings that year. In March, Becker was sentenced to 15 months in prison.

Garcia said the defendants accomplished their scheme using various means, including inputting false data into computer models used to estimate the value of positions held by the commodity desk. Other false inputs were apparently made to artificially decrease the amount of risk being taken by the trading desk. The models therefore showed millions of dollars of artificially inflated profits for Citibank.

The government further charged that Gile and Becker caused false information to be reported to Citibank's financial control department, which monitored the commodity desk. In addition to the prison sentence, Gile was ordered to pay $185,819 in restitution and a $3,000 fine.

The law firm of Shepherd Smith and Edwards represents investors seeking recovery of damages in securities fraud claims Contact us if you would like to schedule a free confidential consultation with one of our securities attorneys.

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Posted In: Citigroup , Fraudulent Trading

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May 27, 2007

Citigroup, Merrill Lynch and Lehman Ex-Brokers Face Retrial in Eavesdropping Case

Three former brokers of Citigroup, Merrill Lynch and Lehman Brothers face a second trial on charges they conspired to commit fraud by allowing day traders to eavesdrop on orders being discussed on investment firms' internal “squawk boxes.” Four current and former executives at the day trading firm A. B. Watley Group will also be retried for their alleged roles in the scheme.

After a seven-week trail seven defendants including these former brokers were acquitted of securities fraud and other charges, but the jury deadlocked on the conspiracy charges opening the door to a retrial.

Prosecutors assert the brokers conspired to give Watley traders access to large orders broadcast over intercoms, or “squawk boxes”, in exchange for cash and commissions. The traders bought or sold stock ahead of the orders in anticipation of share-price swings, prosecutors say.

During the first trial, John J. Amore, Watley’s former chief executive and a prosecution witness, testified he introduced the intercom scheme when he was hired in 2002 as a consultant. Amore pleaded guilty to conspiracy to commit securities fraud prior to the trial.

The law firm of Shepherd Smith and Edwards represents institutional and individual investors in investment claims. Collectively, we have recovered more than $100 million from investment and securities brokerage firms. If you or your firm has sustained significant losses in investments contact us to arrange a free confidential consultation with one of our securities litigation lawyers.

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Posted In: Citigroup , Lehman Brothers , Merrill Lynch , Securities Fraud

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May 16, 2007

Citigroup Will Pay $200,000 in SEC Sanctions Connected to LMWW Auction Market Misconduct

Last week, Citigroup Global Markets Inc. said it would pay a $200,000 fine to settle charges by the Securities and Exchange Commission. The charges are connected to Leg Mason Wood Walker Inc’s allegedly improper interference with auction rate securities. Citigroup is LMWW’s merger successor.

According to the SEC, the penalty amount was determined based on LMWW’s willingness to cooperate, the “relatively small share of the auction rate securities markets," and LMWW’s decision to report the allegedly illegal practices at a later time than did other broker-dealers from an earlier settlement.

During that related case, 15 broker-dealers—Citigroup included—said they would pay penalties of over $13 million related to charges that they participated in violative practices affecting the $200 billion auction rate securities market.

Because Citigroup already is facing a cease and desist order connected to the earlier case, the SEC did not request an order for this case.

The SEC says that auction rate securities are preferred stock or bonds that have dividend yields or interest rates that are reset on a periodic basis via auctions. Institutional investors are the ones that primary participate in this type of market.

LMWW allegedly underwrote and supervised a limited amount of these auctions. The SEC is accusing LMWW of bidding for its proprietary account during these auctions so that there wouldn’t be failed auctions without proper disclosure. As a result, LMWW was able to influence the clearing rate, which determines the interest of yield an issuer has to pay investors until the next auction takes place.

In instances where LMWW lowered the clearing rate, investors were able to get a lower return rate on investments. The SEC says that investors might not have known of the credit risks and liquidity connected with certain securities when LMWW’s actions influenced the clearing rate.

For nearly 20 years, Shepherd Smith and Edwards has represented thousands of investor clients in their claims against hundreds of brokerage firms. Our team of attorneys, legal staff, and consultants jointly have over 100 years experience in the securities industry, which makes us extremely qualified to provide legal representation to clients nationwide in filing claims against financial companies.

To discuss whether we can help you recover your investment loss, contact Shepherd Smith and Edwards today to schedule your free consultation.

Related Web Resources:

Read the SEC order (PDF)

Citigroup

Securities and Exchange Commission

Posted by Shepherd Smith & Edwards | | Email This Post

Posted In: Citigroup , SEC Enforcement

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