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