In the days leading up to Labor Day 2012, Citigroup announced that the bank would pay $590 million to settle a class-action lawsuit by stockholders who contended that the bank’s management as well as some directors had misled the stockholders about the bank’s exposure to subprime mortgage debt in 2007. The bank had used improper accounting practices to show an inflated asset base. The shareholders claim that the bank assured them that it had sold billions of dollars in collateralized debt obligations based on subprime mortgages. However, the bank had actually guaranteed the securities against any losses. To further disguise the risks to the stockholders, the bank moved the guarantees to separate entities. Unfortunately, the settlement is insufficient as a means to thwart banks such as Citibank from misleading investors. Legislators might want to look at two reforms in particular.
The full essay is at "No Guilt at Citibank."
See: Cases of Unethical Business, available in print and as an ebook at Amazon.com.
See: Cases of Unethical Business, available in print and as an ebook at Amazon.com.
