VAMPIRES IN
THE CITY
Bloodsuckers in a Castle Called Citigroup
/\0/\
Sightings from The Catbird Seat
~ o ~
Financial industry paid
millions to Obama aide!
Summers earned cash last year from firms
over which he now has influence
By Jeff Zeleny, The New York Times
WASHINGTON - Lawrence H. Summers, the top economic adviser to President Obama, earned more than $5 million last year from the hedge fund D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money, the White House disclosed Friday in releasing financial information about top officials.
Mr. Summers, the director of the National Economic Council, wields important influence over Mr. Obama’s policy decisions for the troubled financial industry, including firms from which he recently received payments.
Last year, he reported making 40 paid appearances, including a $135,000 speech to the investment firm Goldman Sachs, in addition to his earnings from the hedge fund, a sector the administration is trying to regulate.
The White House released hundreds of pages of financial disclosure forms, which are required of all West Wing officials. A White House spokesman, Ben LaBolt, said the compensation was not a conflict for Mr. Summers, adding it was not surprising because he was “widely recognized as one of the country’s most distinguished economists.”
Mr. Summers’s role at the White House includes advising Mr. Obama on whether - and how - to tighten regulation of hedge funds, which engage in highly sophisticated financial trading that many analysts have said contributed to the economic collapse.
Mr. Summers, a former president of Harvard University, was Treasury secretary in the Clinton administration. He appeared before large Wall Street companies like Citigroup ($45,000), J. P. Morgan ($67,500) and the now defunct Lehman Brothers ($67,500), according to his disclosure report. He reported being paid $10,000 for a speaking date at Yale and $90,000 to address an organization of Mexican banks.
While Mr. Obama campaigned on a pledge to restrict lobbyists from working in the White House, a step intended to reduce any influence between the administration and corporations, the ban did not apply to former executives like Mr. Summers, who was not a registered lobbyist. In 2006, he became a managing director of D. E. Shaw, a firm that manages about $30 billion in assets, making it one of the biggest hedge funds in the world.
“Dr. Summers was not an adviser to or an employee of the firms that paid him to speak,” Mr. LaBolt said.
He added, “Of course, since joining the White House, he has complied with the strictest ethics rules ever required of appointees and will not work on specific matters to which D. E. Shaw is a party for two years.”
A review of hundreds of pages of financial disclosure forms on Friday evening offered an extensive portrait of the wealth of top officials in the Obama administration. The forms detail the salaries, bonuses and investments of the president’s circle of advisers, many of whom took deep pay cuts from the private sector and sold their companies to work at the White House.
David Axelrod, who was the chief campaign strategist to Mr. Obama and now serves as a senior adviser to the president, reported a salary of $1 million last year from his two consulting firms. Over the next five years, according to his disclosure form, he will get $3 million from the sale of the two firms, which provide media and strategic advice to political clients. He listed assets of about $7 million to $10 million, and reported a long list of Democratic clients and a few corporate concerns, including AT&T and the Exelon Corporation, a nuclear energy company.
The disclosure forms also shed further light on the compensation received by a top Obama aide who previously worked for Citigroup, one of the largest recipients of taxpayer bailout money. The aide, Michael Froman, deputy national security adviser for international economic affairs, received more than $7.4 million from the company from January 2008 to when he joined the White House this year.
'Shameful'
That money included a year-end bonus of $2.25 million for work in 2008, which Citigroup paid him in January. Such bonuses have prompted political controversy in recent months, including sharp criticism from Mr. Obama, who in January branded them as “shameful.”
The White House had previously acknowledged that Mr. Froman received such a year-end bonus and said he had decided to give it to charity, but would not say what it was.
The administration said Friday that Mr. Froman was working on giving the $2.25 million to a combination of charities related to homelessness and cancer, which took the life of his son this year.
The remainder of Mr. Froman’s earnings from Citigroup included deferred compensation and bonuses for work performed in prior years, as well as a $2 million payment for waiving his carried-interest stake in several private equity funds.
The White House said Mr. Froman decided to take the buyouts to avoid having to recuse himself from foreign-policy issues related to the funds’ investments, like India infrastructure, which means he would be taxed at ordinary income rates on the money.
Millionaires work in a variety of positions across the administration, and they include Desirée Rogers, the White House social secretary. Ms. Rogers, a close Chicago friend of the Obama family, reported income of $2.3 million last year. She earned a salary of $1.8 million from People’s Gas & North Shore Gas, along with three other sources of income from serving on insurance company boards.
Thomas E. Donilon, the deputy national security adviser, reported earning $3.9 million as a partner at the Washington law firm O’Melveny & Myers. His disclosure form says major clients included Citigroup, Goldman Sachs and Apollo Management, a private equity firm in New York that specializes in distressed assets and corporate restructuring.
Mr. Donilon is also entitled to future pension payments from Fannie Mae, where he worked from 1999 to 2005.
Reporting was contributed by Peter Baker, David Johnston, David D. Kirkpatrick, Eric Lipton and Charlie Savage.
This story, Financial Industry Paid Millions to Obama Aide, originally appeared in The New York Times.
BILL MOYERS: Welcome to the JOURNAL.
I sat in a theater packed with passionate moviegoers, every one of them seemingly aghast at the Wall Street skullduggery exposed by Michael Moore in his latest film. It's called 'Capitalism: A Love Story.' Here's an excerpt:
MICHAEL MOORE: We're here to get the money back for the American People. Do you think it's too harsh to call what has happened here a coup d'état? A financial coup d'état?
MARCY KAPTUR: That's, no. Because I think that's what's happened. Um, a financial coup d'état?
MICHAEL MOORE: Yeah.
MARCY KAPTUR: I could agree with that. I could agree with that. Because the people here really aren't in charge. Wall Street is in charge.
BILL MOYERS: That's the progressive Representative from Ohio, Marcy Kaptur, she's with me now. She has a Masters from the University of Michigan, did graduate study at M.I.T. and still lives in the same house in the Toledo working class neighborhood where she grew up.
She's in her 14th term in Congress, the longest-serving Democratic woman in the history of the House, and she's an outspoken financial watchdog on three important Committees: Appropriations, Budget and Oversight and Government Reform.
Also with me is a familiar face to viewers of this broadcast. Simon Johnson is the former Chief Economist at the International Monetary Fund. He now teaches Global Economics and Management at M.I.T.'s Sloan School of Management. He's one of the founders of the website Baselinescenario.com. I check it out daily for Simon's take on the economic and financial crisis.
It's been a year since the great collapse and both my guests are well equipped to assess what's happened since then. Welcome to you both.
MARCY KAPTUR: Thank you.
BILL MOYERS: Let's look at this story that I just read from the Associated Press this week about how Treasury Secretary Geithner is on the phone several times a day with a select group of very powerful Wall Street bankers, especially Citigroup, J.P. Morgan, Goldman Sachs. He will talk to them when Members of Congress have to leave a message on the answering machine. And these are the bankers who helped bring on this calamity and who are now benefiting from it. What does that say to you?
MARCY KAPTUR: That says to me that Wall Street and Washington is a circuit. And because Mr.Geithner headed the New York Fed that that historic relationship, unfortunately, continues. And it gives them special access and special power to influence policy.
SIMON JOHNSON: Well, I think it really tells you how the system works. The system is based on access and is based on what on Wall Street shaping Washington's view of what's important.
It's the people who are very close to Mr. Geithner before when he was the head of the New York Fed. Before he became Treasury Secretary. These people have unparalleled access. And in a crisis, when everything is up for grabs, you don't know what's going on, the people who will take your phone calls, right, in government and people who are going to be standing in the oval office, making the key decisions. That's the heart of the system. That's the heart of how you get your agenda through, by changing their worldview.
MARCY KAPTUR: And they also move people. In other words, Mr. Geithner came from the New York Fed, he came from Wall Street, and he becomes Secretary of the Treasury. His predecessor, Mr. Paulson, came from Goldman Sachs, and he becomes Secretary of Treasury. You can go back decades, and you will see that there's this revolving door between Wall Street and Washington.
And I recently asked Chairman Bernanke of the Federal Reserve, 'Let me ask you a question. Would you be willing to consider a reform where the Cleveland Fed would have equal power to the New York Fed, in terms of how the Fed is run?'
And his answer was, 'No.' ...
CONTINUED (WITH VIDEO) AT ...
http://www.pbs.org/moyers/journal/10092009/watch.html
CATCH IT ALSO IN ...
AND, DON’T MISS...
GOOGLING FOR THE INSURANCE VAMPIRES!
/\o/\
Ex-CEO of Bankoh considered
for Citigroup board
By David Segal, Honolulu Star-Bulletin
Former Bank of Hawaii Chief Executive Michael O'Neill reportedly is one of the candidates being considered for a position on the board of directors at financially troubled Citigroup Inc.
O'Neill, who turned around Bankoh's lagging fortunes in less than four years before retiring at age 57 in August 2004, was mentioned along with former U.S. Bancorp CEO Jerry Grundhofer and William S. Thompson, former co-chief of bond investment manager Pimco, according to a report in the Wall Street Journal.
The newspaper said Citigroup is expected to announce the board changes next week when it files its proxy statement with the Securities and Exchange Commission. Any nominees would have to be formally approved by the board and voted on by shareholders.
O'Neill took over then-called Pacific Century Financial Corp. from Larry Johnson on Nov. 3, 2000, and in less than four years transformed the bank into a more efficient operation, elevated earnings to record highs and increased shareholder value nearly fourfold.
He also became somewhat of a TV personality with the bank's "Tell Mike" campaign.
Richard Parsons, a one-time University of Hawaii student who took over as chairman last month, is one of the few Citigroup directors with experience in both banking and leading a large company.
February 27, 2009
Citi shares set to plumb new all-time lows
By John Spence
BOSTON (MarketWatch) -- Shares of Citigroup Inc. were poised to fall to fresh all-time lows on Friday after the company said the government will boost its stake in the troubled bank to firm up its capital base. The stock was down more than 50% in premarket trading Friday to $1.28 at last check. The shares' most recent 52-week low was $1.61 on Feb. 20.
Citigroup reaches aid deal
with government
By MARTIN CRUTSINGER, AP Economics Writer Martin Crutsinger
WASHINGTON – The U.S. government will exchange up to $25 billion in emergency bailout money it provided Citigroup Inc. for as much as a 36 percent equity stake in the struggling bank, greatly increasing the risks to taxpayers as voter unhappiness about the broader bailout program rises.
The deal announced Friday by the company and the Treasury Department represents the third rescue attempt for Citigroup in the past five months. It's contingent on private investors agreeing to a similar swap.
The administration decided to restructure the bailout package for Citigroup again in the hopes that converting $25 billion of preferred shares into common stock would give investors more confidence the bank has sufficient capital reserves to withstand mounting losses on its holdings of mortgages and other loans. While the conversion to common stock will dilute current shareholders' investments, a wider equity base could calm investors since there would be more reserves in place to guard against further losses as the economy sours.
Besides a stronger capital base, the company is getting a critical boost to its cash flow as it forgoes its 4 cent annual dividend on its common shares. That is giving Citi an additional $2.18 billion a year.
But the deal doesn't affect one of Citi's greatest problems, the billions of dollars in failed mortgage-backed securities that still sit on its books. As those investments have fallen in value, they have exacerbated Citi's losses.
The plan comes one day after the Obama administration laid the groundwork in its first budget request for greatly increasing the size of the $700 billion bailout program that Congress passed in October. Administration officials said no decisions had been made yet but suggested the size of the effort could be expanded by as much as another $750 billion.
The swap of $25 billion of preferred shares into common stock will expose the government to the same risks facing other holders of the bank's common stock. Shares of Citigroup and many other financial companies have plunged as the sector undergoes its worst crisis in seven decades.
But the administration is mindful about growing unhappiness among voters and lawmakers in the huge sums that have been provided to the nation's banks, money that so far seems to have done little to stabilize the situation.
In his first address to a joint session of Congress on Tuesday, President Barack Obama stressed that the government effort was not aimed at bailing out bank executives who had made bad loans, but instead in getting credit flowing again to consumers and businesses.
"I know how unpopular it is to be seen as helping banks right now, especially when everyone is suffering in part from their bad decisions," Obama said. "I promise you — I get it."
The aim of the government's rescue effort is to keep the New York bank holding company alive and bolster its capital as it faces growing losses amid the intensifying global recession. Existing Citi shareholders would see their ownership stake shrink to as little as 26 percent.
Investors appeared disappointed in the deal and expected dilution of their stake, sending shares plummeting 91 cents, or 37 percent, to a new 52-week low of $1.55 in afternoon trading. Stocks tumbled early but pulled off their lows as the Dow Jones industrial average came within 34 points of breaching the 7,000 mark for the first time in more than 11 years.
Underscoring its precarious nature, the company also disclosed that it recorded a goodwill impairment charge of about $9.6 billion due to deterioration in the financial markets.
The Treasury Department said the transaction requires no new federal funds. But it left the door open for Citigroup to seek additional government funding or for the conversion to common shares of the remaining $20 billion in federal bailout money it received late last year. The government currently holds about an 8 percent stake in Citi.
For now, that $20 billion in government funding will be converted into a new class of preferred shares that will be senior to other bank debt and it will continue to pay a yearly 8 percent cash dividend. As part of the deal, the payout for all other preferred shares will be suspended.
Citi will offer to exchange up to $27.5 billion of its existing preferred stock held by private investors at a conversion price of $3.25 per share. That's a 32 percent premium over Thursday's closing price of $2.46.
The Government of Singapore Investment Corp., Saudi Arabian Prince Alwaleed Bin Talal, Capital Research Global Investors and Capital World Investors are among the private investors that said they would participate in the exchange.
The conversion will help provide Citi the mix of capital to withstand further weakening in the economy. The stock-conversion option was laid out by the administration earlier this week as an option for providing relief to banks. It gives the government greater flexibility in dealing with ailing banks. It also gives the government voting shares, and therefore more say in a bank's operations.
But common shares absorb losses before preferred shares do, which means taxpayers would be on the hook if banks keep writing down billions of dollars' worth of rotten assets, such as dodgy mortgages, as many analysts expect they will.
On the other hand, common stock in banks is incredibly cheap, and taxpayers would reap gains if the banks come back to health and the stock price goes up.
One of the hardest hit banks by the ongoing credit crisis, Citi has also received guarantees from the government protecting it from the bulk of losses on $300 billion of risky investments. Citi has been especially hit hard by investments in the mortgage market, which began to collapse in 2007.
The deal comes as Citi is in the process of shedding assets and cutting staff as it looks to reduce costs and streamline operations ahead of splitting its traditional banking businesses from its riskier operations. Citi last month reached a deal to sell a majority stake in its Smith Barney brokerage unit to Morgan Stanley.
Citi also will reshape its board of directors, Richard Parsons, the bank's chairman, said in a statement Friday. The board, which currently has 15 members, will have a majority of new independent directors as soon as possible, he said.
Three board members in recent weeks have said they would not seek re-election as the company's annual shareholders meeting in April. Two others will reach the mandatory retirement age by the time of the meeting.
Roberto Hernandez Ramirez earlier this month said he would not stay on beyond his current term. Last month, Robert Rubin, a former Treasury secretary who was a longtime Citigroup board member, and Win Bischoff, most recently chairman at Citigroup, announced their retirements from the company.
The goodwill charge announced Friday was added to Citi's 2008 results along with a $374 million impairment charge tied to its Nikko Asset Management unit. The charges resulted in Citi revising its 2008 loss to $27.7 billion, or $5.59 per share.
www.news.yahoo.com/s/ap/20090227/ap_on_bi_ge/citigroup_rescue
Where'd the bailout money go?
Shhhh, it's a secret
By MATT APUZZO, Associated Press
WASHINGTON – It's something any bank would demand to know before handing out a loan: Where's the money going?
But after receiving billions in aid from U.S. taxpayers, the nation's largest banks say they can't track exactly how they're spending the money or they simply refuse to discuss it.
"We've lent some of it. We've not lent some of it. We've not given any accounting of, 'Here's how we're doing it,'" said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. "We have not disclosed that to the public. We're declining to."
The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what's the plan for the rest?
None of the banks provided specific answers.
"We're not providing dollar-in, dollar-out tracking," said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars.
Some banks said they simply didn't know where the money was going.
"We manage our capital in its aggregate," said Regions Financial Corp. spokesman Tim Deighton, who said the Birmingham, Ala.-based company is not tracking how it is spending the $3.5 billion it received as part of the financial bailout.
The answers highlight the secrecy surrounding the Troubled Assets Relief Program, which earmarked $700 billion — about the size of the Netherlands' economy — to help rescue the financial industry. The Treasury Department has been using the money to buy stock in U.S. banks, hoping that the sudden inflow of cash will get banks to start lending money.
There has been no accounting of how banks spend that money. Lawmakers summoned bank executives to Capitol Hill last month and implored them to lend the money — not to hoard it or spend it on corporate bonuses, junkets or to buy other banks. But there is no process in place to make sure that's happening and there are no consequences for banks who don't comply.
"It is entirely appropriate for the American people to know how their taxpayer dollars are being spent in private industry," said Elizabeth Warren, the top congressional watchdog overseeing the financial bailout.
But, at least for now, there's no way for taxpayers to find that out.
Pressured by the Bush administration to approve the money quickly, Congress attached nearly no strings on the $700 billion bailout in October. And the Treasury Department, which doles out the money, never asked banks how it would be spent.
"Those are legitimate questions that should have been asked on Day One," said Rep. Scott Garrett, R-N.J., a House Financial Services Committee member who opposed the bailout as it was rushed through Congress. "Where is the money going to go to? How is it going to be spent? When are we going to get a record on it?"
Nearly every bank AP questioned — including Citibank and Bank of America, two of the largest recipients of bailout money — responded with generic public relations statements explaining that the money was being used to strengthen balance sheets and continue making loans to ease the credit crisis.
A few banks described company-specific programs, such as JPMorgan Chase's plan to lend $5 billion to nonprofit and health care companies next year. Richard Becker, senior vice president of Wisconsin-based Marshall & Ilsley Corp., said the $1.75 billion in bailout money allowed the bank to temporarily stop foreclosing on homes.
But no bank provided even the most basic accounting for the federal money.
"We're choosing not to disclose that," said Kevin Heine, spokesman for Bank of New York Mellon, which received about $3 billion.
Others said the money couldn't be tracked. Bob Denham, a spokesman for North Carolina-based BB&T Corp., said the bailout money "doesn't have its own bucket." But he said taxpayer money wasn't used in the bank's recent purchase of a Florida insurance company. Asked how he could be sure, since the money wasn't being tracked, Denham said the bank would have made that deal regardless.
Others, such as Morgan Stanley spokeswoman Carissa Ramirez, offered to discuss the matter with reporters on condition of anonymity. When AP refused, Ramirez sent an e-mail saying: "We are going to decline to comment on your story."
Most banks wouldn't say why they were keeping the details secret.
"We're not sharing any other details. We're just not at this time," said Wendy Walker, a spokeswoman for Dallas-based Comerica Inc., which received $2.25 billion from the government.
Heine, the New York Mellon Corp. spokesman who said he wouldn't share spending specifics, added: "I just would prefer if you wouldn't say that we're not going to discuss those details."
The banks which came closest to answering the questions were those, such as U.S. Bancorp and Huntington Bancshares Inc., that only recently received the money and have yet to spend it. But neither provided anything more than a generic summary of how the money would be spent.
Lawmakers say they want to tighten restrictions on the remaining, yet-to-be-released $350 billion block of bailout money before more cash is handed out. Treasury Secretary Henry Paulson said the department is trying to step up its monitoring of bank spending.
"What we've been doing here is moving, I think, with lightning speed to put necessary programs in place, to develop them, implement them, and then we need to monitor them while we're doing this," Paulson said at a recent forum in New York. "So we're building this organization as we're going."
Warren, the congressional watchdog appointed by Democrats, said her oversight panel will try to force the banks to say where they've spent the money.
"It would take a lot of nerve not to give answers," she said.
But Warren said she's surprised she even has to ask.
"If the appropriate restrictions were put on the money to begin with, if the appropriate transparency was in place, then we wouldn't be in a position where you're trying to call every recipient and get the basic information that should already be in public documents," she said.
Garrett, the New Jersey congressman, said the nation might never get a clear answer on where hundreds of billions of dollars went.
"A year or two ago, when we talked about spending $100 million for a bridge to nowhere, that was considered a scandal," he said.
http://news.yahoo.com/s/ap/20081222/ap_on_bi_ge/meltdown_secrets
December 21, 2008
AP study finds $1.6B went to
bailed-out bank execs
By FRANK BASS and RITA BEAMISH, Associated Press
Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.
The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.
Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.
The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.
Rep. Barney Frank, chairman of the House Financial Services committee and a long-standing critic of executive largesse, said the bonuses tallied by the AP review amount to a bribe "to get them to do the jobs for which they are well paid in the first place....
The AP compiled total compensation based on annual reports that the banks file with the Securities and Exchange Commission. The 116 banks have so far received $188 billion in taxpayer help.
Among the findings:
_The average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits.
_Lloyd Blankfein, president and chief executive officer of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million.
This year, Goldman will forgo cash and stock bonuses for its seven top-paid executives. They will work for their base salaries of $600,000, the company said. Facing increasing concern by its own shareholders on executive payments, the company described its pay plan last spring as essential to retain and motivate executives "whose efforts and judgments are vital to our continued success, by setting their compensation at appropriate and competitive levels." Goldman spokesman Ed Canaday declined to comment beyond that written report.
The New York-based company on Dec. 16 reported its first quarterly loss since it went public in 1999. It received $10 billion in taxpayer money on Oct. 28.
_Even where banks cut back on pay, some executives were left with seven- or eight-figure compensation that most people can only dream about. Richard D. Fairbank, the chairman of Capital One Financial Corp., took a $1 million hit in compensation after his company had a disappointing year, but still got $17 million in stock options. The McLean, Va.-based company received $3.56 billion in bailout money on Nov. 14.
_John A. Thain, chief executive officer of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. Thain, a former chief operating officer for Goldman Sachs, took the reins of the company in December 2007, avoiding the blame for a year in which Merrill lost $7.8 billion. Since he began work late in the year, he earned $57,692 in salary, a $15 million signing bonus and an additional $68 million in stock options.
Like Goldman, Merrill got $10 billion from taxpayers on Oct. 28.
The AP review comes amid sharp questions about the banks' commitment to the goals of the Troubled Assets Relief Program (TARP), a law designed to buy bad mortgages and other troubled assets. Last month, the Bush administration changed the program's goals, instructing the Treasury Department to pump tax dollars directly into banks in a bid to prevent wholesale economic collapse.
The program set restrictions on some executive compensation for participating banks, but did not limit salaries and bonuses unless they had the effect of encouraging excessive risk to the institution. Banks were barred from giving golden parachutes to departing executives and deducting some executive pay for tax purposes.
Banks that got bailout funds also paid out millions for home security systems, private chauffeured cars, and club dues. Some banks even paid for financial advisers. Wells Fargo of San Francisco, which took $25 billion in taxpayer bailout money, gave its top executives up to $20,000 each to pay personal financial planners.
At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend for financial planning services came to $66,748, on top of his $975,000 salary and $7.5 million bonus. His car and driver cost $178,879. Kelly also received $846,000 in relocation expenses, including help selling his home in Pittsburgh and purchasing one in Manhattan, the company said.
Goldman Sachs' tab for leased cars and drivers ran as high as $233,000 per executive. The firm told its shareholders this year that financial counseling and chauffeurs are important in giving executives more time to focus on their jobs.
JPMorgan Chase chairman James Dimon ran up a $211,182 private jet travel tab last year when his family lived in Chicago and he was commuting to New York. The company got $25 billion in bailout funds.
Banks cite security to justify personal use of company aircraft for some executives. But Rep. Brad Sherman, D-Calif., questioned that rationale, saying executives visit many locations more vulnerable than the nation's security-conscious commercial air terminals.
Sherman, a member of the House Financial Services Committee, said pay excesses undermine development of good bank economic policies and promote an escalating pay spiral among competing financial institutions — something particularly hard to take when banks then ask for rescue money.
He wants them to come before Congress, like the automakers did, and spell out their spending plans for bailout funds.
"The tougher we are on the executives that come to Washington, the fewer will come for a bailout," he said.
___
On the Net:
SEC Filings & Forms: http://www.sec.gov
Emergency Economic Stabilization Act: http://www.treas.gov/initiatives/eesa/
Government plans massive Citigroup rescue effort
By Jeannine Aversa, AP Economics Writer
Citigroup rescue includes $20B cash injection,
guarantee on billions in assets
WASHINGTON (AP) -- Rushing to rescue Citigroup, the government agreed to shoulder hundreds of billions of dollars in possible losses at the stricken bank and to plow a fresh $20 billion into the company.
Regulators hope the dramatic action will bolster badly shaken confidence in the once-mighty banking giant as well as the nation's financial system, a goal that so far has been elusive despite a flurry of government interventions to battle the worst global crisis since the 1930s.
Wall Street appeared encouraged as stock futures moved higher ahead of the market opening in New York. Dow Jones industrial average futures rose almost 2 percent. Stock markets in Britain and Germany gained more than 4 percent in afternoon trading. Citigroup shares themselves climbed 44 percent to $5.64 in premarket trading.
"If they didn't help, the damage would be beyond imagination," said Teck-Kin Suan, economist at United Overseas Bank in Singapore.
The action, announced late Sunday by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp., is aimed at shoring up a huge financial institution whose collapse would wreak havoc on the already fragile financial system and the U.S. economy.
"With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy," the three agencies said in a joint statement. "We will continue to use all of our resources to preserve the strength of our banking institutions, and promote the process of repair and recovery and to manage risks."
Analysts said a Citigroup failure would have seized up still fragile lending markets and caused untold losses among institutions holding debt and financial products backed by the company.
"It would create chaos," said Winson Fong, managing director at SG Asset Management in Hong Kong, which oversees about $3 billion in equities in Asia. "Simply put, you couldn't borrow or lend for a while. This is a nightmare scenario."
The bold move is the latest in a string of high-profile government bailout efforts. The Fed in March provided financial backing to JPMorgan Chase's buyout of ailing Bear Stearns. Six months later, the government was forced to take over mortgage giants Fannie Mae and Freddie Mac and throw a financial lifeline -- which was recently rejiggered -- to insurer American International Group.
Critics worry the actions could put billions of taxpayers' dollars in jeopardy and encourage financial companies to take excessive risk on the belief that the government will bail them out of their messes.
The Citigroup rescue came after a weekend of marathon discussions led by Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke. Timothy Geithner, president of the Federal Reserve Bank of New York, who is being tapped by President-elect Barack Obama as his Treasury chief also participated.
Vikram S. Pandit, Citi's chief executive officer, welcomed the action. "We appreciate the tremendous effort by the government to assure market stability," he said in a statement issued early Monday.
The $20 billion cash injection by the Treasury Department will come from the $700 billion financial bailout package. The capital infusion follows an earlier one -- of $25 billion -- in Citigroup in which the government also received an ownership stake.
As part of the plan, Treasury and the FDIC will guarantee against the "possibility of unusually large losses" on up to $306 billion of risky loans and securities backed by commercial and residential mortgages.
Under the loss-sharing arrangement, Citigroup Inc. will assume the first $29 billion in losses on the risky pool of assets. Beyond that amount, the government would absorb 90 percent of the remaining losses, and Citigroup 10 percent. Money from the $700 billion bailout and funds from the FDIC would cover the government's portion of potential losses. The Federal Reserve would finance the remaining assets with a loan to Citigroup.
In exchange for the guarantees, the government will get $7 billion in preferred shares of Citigroup. In addition, Citi said it will issue warrants to the U.S. Treasury and the FDIC for approximately 254 million shares of the company's common stock at a strike price of $10.61.
As a condition of the rescue, Citigroup is barred from paying quarterly dividends to shareholders of more than 1 cent a share for three years unless the company obtains consent from the three federal agencies. The bank is currently paying a dividend of 16 cents, halved from a 32-cent payout in the previous quarter. The agreement also places restrictions on executive compensation, including bonuses.
Importantly, the agreement calls on Citigroup to take steps to help distressed homeowners.
Specifically, Citigroup will modify mortgages to help people avoid foreclosure along the lines of an FDIC plan that was put into effect at IndyMac Bank, a major failed savings and loan based in Pasadena, Calif.
Under the IndyMac plan, struggling home borrowers pay interest rates of about three percent for five years. Rates are reduced so that borrowers aren't paying more than 38 percent of their pretax income on housing.
The IndyMac plan also was used as a model for a new program by mortgage finance companies Fannie Mae and Freddie Mac and for two other failed thrifts taken over by the government on Friday. FDIC Chairman Sheila Bair has been pressing Treasury to use $24 billion from the $700 billion bailout program to put the mortgage modification program on national footing, but Paulson is opposed to that idea.
Citigroup has seen its shares lose 60 percent of their value in the past week, reflecting a crisis of confidence among skittish investors. They are worried all the risky debt on Citigroup's balance sheet will turn into losses as the economy worsens and the markets stay turbulent -- losses that could be nearly impossible to reverse.
Citigroup is such a large, interconnected player in the financial system that it is seen by Washington policymakers as too big to fail. The company has operations stretching around the globe in more than.100 countries
Analysts consider Citigroup the most vulnerable among the major U.S. banks -- especially after it failed to nab Wachovia Corp., which was bought instead by Wells Fargo & Co. That was a missed opportunity for Citi to gets its hands on much-needed U.S. deposits that would bolster its cash position.
Citigroup was especially hard hit by the meltdown in risky, subprime mortgages made to people with tarnished credit or low incomes. Foreclosures on those mortgages spiked, leaving Citi and other financial companies wracking up huge losses on the soured investments. The company has failed to turn a profit during the past four quarters and has announced plans to slash thousands of jobs.
http://biz.yahoo.com/ap/081124/citigroup.html
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The Battle For Assets
By Dave Califano, Worth Magazine
Big and bigger—by a different measure
The name of the game in the financial-services business these days can be summed up in three words: assets under management. He who ends up with the most, wins.
Witness the $48 billion merger of Travelers Group with Citicorp. This combination will create a huge new financial-services company--one with an insurance arm (Travelers), a banking unit (Citibank), and an investment house (Salomon Smith Barney).
The new firm, to be called Citigroup, will have over 100 million customers worldwide and control roughly $1.36 trillion in client investment assets (not counting bank deposits). That barely edges out Merrill Lynch, which has $1.35 trillion in client assets under management. UBS, the product of this year's merger between Union Bank of Switzerland and Swiss Bank, controls $1.09 trillion in client assets.
More recently, rumors have been flying that insurance giant AIG will try to snap up Goldman Sachs after Wall Street's most prestigious investment bank goes public as early as this fall. There's also talk that securities firm Lehman Brothers or brokerage house PaineWebber could fall prey to a large European bank like Deutsche Bank.
Given the grab for client assets under way in the industry, Worth was surprised to learn there's no single source of reliable information that ranks the top firms. So we researched our own list of the top ten. Included in each firm's total are institutional assets, brokerage accounts, mutual funds, variable annuities, and private-banking accounts--everything but retail bank deposits. We also looked only at U.S. companies.
Client assets, of course, aren't the only measure of a financial company's clout. Revenue, equity capital, and the institution's own asset base all provide different pictures of a firm's size and strength. The new Citigroup, for instance, will have $44 billion in capital. But it won't stay on top for long.
When NationsBank completes its previously announced merger with BankAmerica (expected in early October), it will have $48.9 billion.
And so the battle continues.
The Top Ten in Client Assets (in Billions) |
||
1. |
Merrill Lynch |
$1,352 |
2. |
Travelers |
1,140 |
3. |
UBS |
1,093 |
4. |
Fidelity Investments |
941 |
5. |
Barclays global investors |
564 |
6. |
Mellon Bank |
460 |
7. |
State Street |
459 |
8. |
Charles Schwab |
400 |
9. |
Vanguard Group |
375 |
10. |
Morgan Stanely Dean Witter |
374* |
Data as of 6/ 30/98. *Data as of 5/31/98. Sources: Company reports and Market Guide. |
||
November 22, 2008
Pressure on Citigroup builds,
shares fall below $4
By MADLEN READ, Associated Press
Pressure intensified on Citigroup to sell part or all of itself as its stock fell below $4 a share on Friday and fears escalated about future loan losses.
CEO Vikram Pandit told managers earlier in the day he opposes breaking up the company, but the bank's board of directors was meeting Friday to discuss whether to do exactly that, the Wall Street Journal reported.
What investors are worried about is that all the risky debt sitting on Citigroup's balance sheet will eventually turn into losses as the economy worsens and the markets stay turbulent - losses that could be nearly impossible to reverse.
Investors were also fearful that the government might orchestrate a takeover of Citigroup over the weekend that could wipe out common shareholders, said Paul Miller, a Friedman Billings Ramsey banking analyst.
The government was instrumental in JPMorgan Chase & Co.'s buyout of Bear Stearns and Washington Mutual Inc., deals that left shareholders with little or no payouts.
The Treasury Department, the Federal Reserve and other banking regulators are monitoring the situation, government officials said. They spoke on condition of anonymity because of the sensitive nature of the matter.
Concerns about the solvency of financial institutions were starting to ebb after the downfall earlier in the year of Bear Stearns Cos., Lehman Brothers Holdings Inc., and American International Group Inc. But now they are back with a vengeance as the recession deepens, raising the prospects of even more massive loan losses.
Just a couple months ago, Citigroup was the largest bank in the world by assets, stretching into everything from credit cards to consumer banking to high-stakes corporate dealmaking. The company was the result of an idea spawned by the financial deregulation in the late 1990s - that consumers and corporations alike would be better served by a bank that could meet all of their needs.
Almost from the start, though, investors complained Citigroup was too sprawling and too complex to manage properly. And when the subprime mortgage crisis ripped through Wall Street starting last year, Citigroup was hit especially hard because of its high exposure to bad debt. Now, it has failed to turn a profit during the past four quarters, and its shares are trading for less than the cost of a pint of beer at a Wall Street pub.
As a result, analysts consider Citigroup the most vulnerable among the major U.S. banks - especially after it failed to nab Wachovia Corp., bought instead by Wells Fargo & Co., a missed opportunity that put Citi behind in the race for U.S. deposits.
Citigroup's shares tumbled as low as $3.05 a share Friday before recovering to close at $3.77 a share, a decline of 20 percent that left them at their lowest level in nearly 16 years. It was a continuation of a sharp, weeklong plunge that could not be stemmed by Saudi investor Prince Alwaleed bin Talal's decision Thursday to raise his stake in the company to 5 percent from less than 4 percent.
The shares have shed 60 percent of their value since last Friday.
Citigroup has already raised $75 billion in capital this year, including a $25 billion cash investment from the government - and none of it has been enough to muster confidence.
Raising more money on the open market is "pretty much off the table," given the recent plunge in the bank's shares, said William Fitzpatrick, an equity analyst at Optique Capital Management Inc. And raising more cash from outside investors or the government would be "a Band-Aid."
"You're going to have to see more sizable divestitures," Fitzpatrick said. "They're going to have to make changes here, and they don't have time on their side anymore."
People familiar with CEO Pandit's call Friday morning with senior managers, who spoke anonymously because the comments during the call were not made public, said his message was similar to that at his town hall meeting with employees on Monday - that Citigroup has adequate capital, and that he supports the universal bank model for Citigroup, including arms such as Smith Barney.
On Monday, Pandit said the universal banking model is "the right model," and that Citigroup's strategy is "to be the world's truly global universal bank."
Still, one person said, "it's clear everything is on the table. That wasn't explicit, but I think it's clear."
An outright sale shouldn't be ruled out, but it appears unlikely, said Alois Pirker, an analyst at financial services research firm Aite Group. Not only are there few potential buyers right now, but "firms prefer to cherry pick," he said. "If you don't have a well integrated shop, the benefit of taking over the whole versus pieces diminishes."
Pirker said sale opportunities include Citi's Global Transaction Services business and its brokerage, Smith Barney. Pandit has said that these two businesses are important to Citigroup - but these two franchises are not core to retail banking and would be attractive to potential buyers, Pirker said, because they have performed well in the recent turbulent environment.
Selling off the businesses in a particular region is another option, Pirker said. Recently, Citigroup sold off its retail banking business in Germany - it could do the same with Japan, for example, he said.
Citigroup could also consider a merger rather than an outright sale.
"A merger is indeed a possibility at this point," Fitzpatrick said. He said there are a number of firms that would be eager to take over some of Citigroup's businesses - particularly a company like Goldman Sachs Group Inc., an investment bank that recently turned into a bank holding company and is now on the prowl for deposits.
The bank has been rushing to get leaner and wind down its assets backed by risky debt. Monday, Citigroup said it will cut 53,000 jobs, on top of 22,000 cuts previously announced. On Wednesday, the bank said it is acquiring the remaining $17.4 billion in assets held by complex debt products known as structured investment vehicles that it previously ran off its balance sheet.
The subprime residential mortgage crisis has swelled into a full-blown debt crisis for not just Citigroup, but other banks as well, leading to defaults in everything from leveraged loans to credit card debt to commercial real estate loans.
Even JPMorgan Chase, one of the nation's stronger large banks, is shedding about 10 percent of its investment bank staff to better navigate the tough climate.
On Monday, Citigroup's Pandit said the company's consumer portfolio losses could rise between $1 billion and $2 billion each quarter through mid-2009. With Citigroup reporting net credit losses of $4.9 billion during the 2008 third quarter, the forecast means losses could swell to more than $10 billion by the middle of next year.
Pandit also said at the time that Citigroup plans to move $80 billion worth of marked-down assets on its balance sheet into a held for investment, held to maturity or available for sale category - instead of listing them on their trading portfolio. Pandit said the accounting change "allows us to benefit from the inherent upside from these marked-down assets," but some investors saw the move as a tactic to hide bad assets, Fitzpatrick said.
Citi is "a great franchise, but it's damaged right now," Fitzpatrick said. "No one knows what the ultimate losses are going to be on a $2 trillion balance sheet."
Deutsche Bank's Mike Mayo estimated in a note Thursday that Citi will probably have to take an additional $7 billion to $20 billion in markdowns on its investments in the capital markets.
www.forbes.com/feeds/ap/2008/11/22/ap5729916.html
October 25, 2008
Many bailed-out banks plan
pay raises, worker bonuses
By Rachel Beck and Joe Bel Bruno, Associated Press
NEW YORK — Despite the Wall Street meltdown, the nation's biggest banks are preparing to pay their executives and employees as much as last year or more, including bonuses tied to personal and company performance.
So far this year, nine of the largest U.S. banks, including some that have cut thousands of jobs, have seen total costs of salaries, benefits and bonuses grow by an average of 3 percent from a year ago, according to an Associated Press review.
"Taxpayers have lost their life savings, and now they are being asked to bail out corporations," New York Attorney General Andrew Cuomo said of the AP findings. "It's adding insult to injury to continue to pay outsized bonuses and exorbitant compensation."
Banks will decide what to pay out in bonuses in the coming months. Just because they've been accruing money for incentive pay doesn't mean they will pay it out in full.
That there is a rise in pay, or at least not a pronounced dropoff, from 2007 is surprising because many of those companies were doing some of their best business ever, at least in the first half of last year. In 2008, each quarter has been weaker than the last.
"There are, of course, expectations that the payouts should be going down," David Schmidt, a senior compensation consultant at James F. Reda & Associates. "But we haven't seen that show up yet."
Shelling out bonuses
Some banks are setting aside large amounts. At Citigroup, which has cut 23,000 jobs this year amid the crisis, pay expenses for the first nine months of this year came to $25.9 billion, 4 percent more than in the same period last year.
Even if you subtract what the bank has shelled out in severance pay and other costs related to the job cuts, overall pay is only slightly lower this year.
Typically, about 60 percent of Wall Street pay goes to salary and benefits, and about 40 percent goes to end-of-the-year cash and stock bonuses that hinge on performance, both by the individual and the company, said Brad Hintz, a securities industry analyst at Sanford Bernstein and a former chief financial officer at Lehman Brothers.
"The fundamental goal of the compensation plan is to allow an employee to get wealthy," Hintz said. He also pointed out that the workers' pay is supposed to be "exposed to the risk of the parent company."
This should be the year where that structure is tested. The financial crisis, brought about by mountains of mortgage-related bad assets, caused many banks to falter or fail and lending to dry up and prompted Congress to pass a $700 billion bailout package. As part of that, the government is pouring $125 billion through stock purchases into the nine large financial companies cited in AP's review of compensation.
Besides Citigroup, those include Bank of New York Mellon, Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, Merrill Lynch, Wells Fargo & Co., and State Street. Another $125 billion will be made available to other banks.
Those taking cash from Uncle Sam must follow guidelines limiting executive pay, including a ban on golden parachutes for departing executives. No restrictions are placed on across-the-board pay.
In total, those nine banks had pay-related costs of $108 billion for the first three quarters of the year. The average increase came to just shy of 3 percent, according to AP figures.
Some spend less
Some banks have set aside less.
Merrill Lynch's costs for pay were $11.2 billion for the first nine months of the year, 3 percent less than last year. That nearly matches the company's $11.7 billion overall loss so far this year.
Merrill spokesman William Halldin told AP that the company thought a better measure is to compare the 2008 compensation expense with the first three quarters of 2006. That would reflect an 18 percent decline from Merrill's last profitable year, he said.
On Wednesday, insurer American International Group agreed to freeze payouts from its $600 million bonus pool and compensation packages for the chief executive and chief financial officers, as well as cancel unnecessary corporate trips and junkets.
AIG, which is not part of the AP review of bank compensation costs, has received government loans topping $120 billion to keep it from collapse. Cuomo calls it a "test case" on payouts.
Retiree fund
down $150.2M
Advertiser Staff
The market value of assets in the Hawai'i Employees' Retirement System slid by $150.2 million during the latest quarter as the pension fund had a negative return on investments because of turbulent financial markets.
The pension plan had a negative 1 percent return during the April-June period, a better performance than expected — and better, too, than the negative 1.4 percent median returns of similar plans.
The pension plan ended the quarter with $10.8 billion in assets.
The end of the quarter also marked the end of the fiscal year for the ERS. During the second half of the 12-month period the ERS had negative returns; it ended its fiscal year with assets lower by $730.1 million.
The pension plan provides retirement benefits for state and county workers and employs investment advisers to manage its portfolio of stocks, bonds, real estate and other investments as it tries to achieve an annual return of 8 percent.
For the fiscal year, the ERS had a return of negative 3.4 percent. Its peer plans had a median return of negative 4.4 percent during the period.
Even with the decline in assets the ERS has enough money for now to provide retirement benefits for its more than 100,000 members.
For more, GO TO > > > The Great Nest Egg Robberies; CV05-00030-Farmer vs. Harmon - Witness: Yukio Takemoto
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State finds new pension savings administrator
By Johnny Brannon, Honolulu Advertiser
The state has quietly dumped the longtime administrator of its Deferred Compensation Plan for public employees and selected another firm owned in part by a parent company targeted in a major fraud investigation.
The state has put its new contract with CitiStreet LLC on hold, however, because of unrelated protests filed by other bidders, including Hawaii Benefits Inc., which has managed the plan for more than 20 years.
CitiStreet is a joint venture half-owned by Citigroup, one of the top lenders to collapsed energy giant Enron. Members of the U.S. Senate Governmental Affairs Committee have alleged that Citigroup helped Enron hide its massive debt problems from investors, and an investigation is ongoing.
The deferred compensation plan administrator manages the enrollment and record keeping for money that public employees elect to have deducted from their paychecks and invested for future needs such as retirement. There are more than 43,000 participants employed by the state and the counties of Hawai'i, Kaua'i and Maui.
The administrator proposes investments, but a state board of trustees makes the final selections of investment options and monitors their performance.
A petition that sharply criticizes Citistreet has begun circulating among some state employees, which asks the trustees to reconsider its award because of the fraud probe and other matters.
Acting board president Diana Kaapu did not return repeated calls. She recently issued a notice to clarify key issues related to the choice "because inaccurate and misleading information concerning actions" by the board had "been disseminated recently."
The selection was made in October under the tenure of former board president Davis Yogi, who now serves as state airports director. He said the seven trustees considered a range of factors in making their selection, such as the variety of services offered and how the firm would educate participants about their investment options.
Yogi said the trustees voted anonymously, and declined to say whether he was satisfied with the selection that was made. He said the trustees were aware of the fraud allegations involving Citigroup and made numerous inquiries about its potential impact on CitiStreet.
The current five-year contract with Hawaii Benefits was worth about $16 million, and had been extended for one year at about $3.3 million, he said.
The administrator contract was put out to bid because Hawaii Benefits' contract expires on June 30. The contract is paid for by plan participants through administrative fees, rather than by the state.
In a letter to the board, Hawaii Benefits president Mike Moss said he was "disappointed and perplexed" that his firm was not chosen to continue as plan administrator. He said the company enjoyed "the highest level of participant satisfaction."
He said the company had been given no indication that the board was dissatisfied with Hawaii Benefits and requested an opportunity to satisfy any changed expectations of board members.
The other company challenging the award is Great-West Life and Annuity Insurance Company/Benefits Corp.
The firm believes CitiStreet will unfairly be able to use a subsidiary to handle its marketing, Great-West senior vice-president of government marketing Gregg Seller said.
That would give the subsidiary access to plan participants' addresses and phone numbers to market other products that had not been approved by the trustees, he said.
He said the board had also refused to accept a written response to a clarification to the bid Great-West submitted.
"We weren't modifying the proposal, just explaining how it would work," he said.
Representatives from CitiStreet did not immediately return calls.
Many members of the Hawai'i Government Employees Association have called the union's headquarters to inquire about the new plan administrator and ask a wide variety of questions, HGEA deputy executive director Randy Perreira said.
"This is retirement money for these people, so certainly we would hope their money is safe," he said.
The union was apprised of the new contract but was not involved in the selection process and has little information about the challenges that have been lodged, he added.
Citigroup's links with Enron are being probed by the Senate panel's Permanent Subcommittee on Investigations.
"Enron's deceptions were shocking, and equally shocking was the extent to which respected U.S. financial institutions like Chase, Citigroup and Merrill Lynch helped Enron carry out its deceptions," the subcommittee's head, Sen. Carl Levin, D-Mich., said in a written statement.
Citigroup announced earlier this month that it would establish a $1.5 billion reserve to pay for litigation and settlements.
August 7, 2008
Citigroup to buy back over
$7 billion in auction rate securities
By Wallace Witkowski
SAN FRANCISCO (MarketWatch) -- Citigroup Inc. will buy back more than $7 billion in illiquid auction rate securities under a settlement, the Office of the New York Attorney General said Thursday.
Under the settlement, Citigroup will have to buy back the securities no later than Nov. 5 to relieve about 40,000 customers who have been unable to sell the securities since Feb. 12.
Citigroup will also have to pay the State of New York a $50 million civil penalty and a separate $50 million civil penalty to the North American Securities Administrators Association, the office said.
May 9, 2008
AIG, Citi Rekindle Credit Fears;
Stocks Tumble
Steve Schaefer, Forbes
Stocks were under the weather in New York on a rainy Friday morning, after a decent day Thursday.
Of course, things got markedly worse after the close, when American International Group reported disastrous first-quarter earnings, and they hardly improved Friday morning, with Citigroup expected to announce it will sell a significant portion of its assets, sparking fears that more losses are in store for the bank.
The Dow Jones industrial average fell 122 points, or 1.0%, to 12,744, while the Standard & Poor's 500 lost 12 points, or 0.9%, to 1,385, and the Nasdaq dropped 20 points, or 0.8%, to 2,431.
AIG swung to a $7.8 billion loss in the first quarter, far worse than expected, stoking fears that the credit crisis is still hammering Wall Street. The insurer also announced plans to raise $12.5 billion in fresh capital through sales of common stock and fixed-income securities. (See: "AIG's Hope Worth $12.5B")
Shares of AIG tumbled $2.66, or 6.0%, to $41.49, to start the day.
Citigroup was the big story though, with its analyst day under way. The market has been waiting to hear more on the vision new Chief Executive Vikram Pandit has for the bank, and reports early Friday suggested those plans are significant indeed. (See: "What Would Dimon Do?") Pandit is expected to announce plans to sell businesses worth $400 billion, possibly including consumer finance divisions in the United States, Japan, Mexico and Germany.
The sheer size of the potential sale sparked fears the bank could be facing more heavy losses and emboldens cynics who have long-criticized the financial giant built by Sandy Weill as too large and unwieldy. Shares of Citigroup slipped at the open but righted themselves to gain 29 cents, or 1.2%, to $24.59....
The bull run in oil prices continued Friday morning, as crude was up $1.86, to $125.55 a barrel, after briefly crossing the $126 threshold.
The day was virtually devoid of economic news, but the U.S. Census Bureau reported the trade deficit narrowed to $58.2 billion in March, from a revised $61.7 billion in February, likely a result of U.S. consumers reining in spending.
January 15, 2008
Citigroup's $10 billion loss
is worst ever
Writedown: $18.1 billion. Dividend cut: 41%. Job cuts:
In the works. Chief Executive Vikram Pandit says financial giant's
performance was 'unacceptable.'
David Ellis, CNNMoney.com
NEW YORK (CNNMoney.com) -- Citigroup Inc. stunned Wall Street Tuesday by reporting that it had suffered a $10 billion quarterly loss - the worst ever in its storied history.
The financial giant also announced a writedown of $18.1 billion related to soured mortgage investments and major cost-cutting initiatives that included a 41 percent cut to its dividend and plans to reduce in its payroll. At the same time, it said it was receiving a $12.5 billion infusion from investors in Kuwait, Singapore and the state of New Jersey.
Wall Street was disappointed by the news as Citigroup (C, Fortune 500) shares tumbled 7 percent in afternoon trade on the New York Stock Exchange.
The company recorded an eye-popping net loss of $9.83 billion, or $1.99 a share, in the fourth quarter - the worst quarterly loss ever recorded in the 196-year-history of the firm and its predecessors.
It also marked the first quarterly loss since Citicorp and Travelers Group merged to form Citigroup in 1998. Only a year ago, Citigroup reported a profit of $5.13 billion, or $1.03 per share.
Citi's top line took a big hit. The company reported revenue of $7.2 billion for the quarter, down 70 percent from $23.8 billion a year earlier.
The results were much worse than forecast. Analysts had expected the company to report a loss of $1 a share on revenue of $10.64 billion, according to analysts surveyed by earnings tracker Thomson Financial.
"It's very clear that Citigroup's fourth-quarter results are unacceptable," Citigroup CEO Vikram Pandit said in a conference call Tuesday morning.
Pandit, who arrived in office a little over a month ago, blamed the company's grim results on subprime exposure in the company's fixed-income business, a surge in credit costs in its U.S. consumer loan portfolio and the staggering $18.1 billion writedown on its subprime-related exposure.
In November, when Citigroup announced the departure of former CEO Charles Prince, the company warned that it could writedown as much as $11 billion. Recent reports had estimated that Citi could writedown as much as $24 billion during the quarter.
Also hit hard was the company's consumer loan portfolio, which suffered a separate $4.1 billion hit due to higher credit costs.
The news also prompted Standard & Poor's to cut its rating on Citigroup's credit Tuesday, lowering it to "AA-" from "AA"....
Big changes
Citi also announced Tuesday that it would reduce its quarterly dividend to 32 cents from 54 cents a share, making it the latest financial institution to reduce its dividend payout.
While cutting the dividend hits shareholders directly, the move is expected to save the company more than $4 billion annually....
The New York-based bank said it raised $12.5 billion in capital from outside investors both domestically and abroad. Two months ago, Citigroup sold a stake to the Abu Dhabi state investment fund in exchange for a $7.5 billion cash infusion....
Citigroup also said it was eliminating 4,200 jobs from the company's 375,000 global workforce. That's in addition to the 17,000 job cuts the company announced last spring....
Citigroup kicks off what will be a particularly busy week for the financial sector. Merrill Lynch, JPMorgan Chase (JPM, Fortune 500) and Washington Mutual (WM, Fortune 500) are all slated to report quarterly results this week.
Citigroup's stock endured one of its worst annual performances on record last year and was the worst performing Dow component in 2007. Its shares finished the year down 47 percent.
January 15, 2008
Citigroup's Write-Down Disaster
Citigroup's future was already in the cards.
On Tuesday, the investment firm announced $18.1 billion in write-downs for the fourth quarter and a net loss of $9.8 billion. In a bid to shore up its capital, the firm secured $12.5 billion in cash from a collection of investors and slashed its dividend by 41%.
While the losses were expected, many investors seemed uncertain about the future health of Citigroup (nyse: C - news - people ). The stock was initially trading higher in premarket trading but eventually dropped 7.3%, or $2.12, to $26.94 at the close and taking the U.S. stock market tumbling with it.
The mortgage meltdown and the rapid devaluation of mortgage-backed securities has forced many of Wall Street's stalwarts to launch aggressive global fund-raisers. In addition to Citi, Merrill Lynch (nyse: MER - news - people ) said on Tuesday that it will sell $6.6 billion in stock to the Korea Investment Corp., Kuwait Investment Authority and the Mizuho Financial Group (nyse: MFG - news - people ).
In the latest round, Citigroup will get $6.9 billion from the Government of Singapore Investment Corp., in exchange for a 4% stake. Meanwhile, Citi also get cash from Capital Research Global Investors, Capital World Investors, the Kuwait Investment Authority, the New Jersey Division of Investment, Saudi Arabia Prince Alwaleed bin Talal, Sanford Weill, and a public sale of $2 billion in stock. The bounty is in addition to the $7.5 billion cash infusion from the Abu Dhabi government’s investment fund, which was announced in November. In another move to strengthen its finances, the company also cut its dividend to 32 cents a share from 54 cents a share....
As one of the hardest-hit institutions in the credit crunch, Citigroup is eager to get its house in order. On Tuesday, the firm said it swung to an eye-popping loss of $9.83 billion, or $1.99 a share, from a profit of $5.1 billion, or $1.03 a share, one year ago. Meanwhile, sales plunged 69.7%, to $7.2 billion, from $23.8 billion....
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The Long Demise of Glass-Steagal
A chronology tracing the life of the Glass-Steagall Act, from its passage in 1933 to its death throes in the 1990s, and how Citigroup's Sandy Weill dealt the coup de grâce:
* * *
December 6, 1996
ENRON and Shell Win Bid in
Capitalization of YPFB's
Transportation Segment
LA PAZ, BOLIVIA – Enron Development Corp. and Shell International Gas Ltd. announced today that the government of Bolivia has named the companies the successful capitalizing company for the transportation segment of the state oil and gas company, Yacimientos Petroliferos...
Business Wire
~ ~ ~
March 30, 1998
The following is an excerpt from a 10-K SEC Filing, filed by TESORO PETROLEUM CORP /NEW/ on 3/30/1998:
ACCESS TO NEW MARKETS
A lack of market access has constrained natural gas production in Bolivia. With little internal gas demand, all of the Company's Bolivian natural gas production is sold under contract to the Bolivian government for export to Argentina.
Major developments in South America indicate that new markets will open for the Company's production. Construction of a new 1,900-mile pipeline that will link Bolivia's extensive gas reserves with markets in Brazil commenced in 1997 and is expected to be operational in early 1999.
The owners of the new pipeline include Petrobras (the Brazilian state oil company), other Brazilian investors, Enron Corp., Shell International Gas Ltd., British Gas PLC, El Paso Energy Corp., BHP, and Bolivian pension funds. When completed, the new pipeline will have a capacity of approximately 1 billion cubic feet ("Bcf") per day.
For more, see...
Vultures Up to their Necks in Tesoro Petroleum
November 8, 2007
Assessing the Mess at Citi
By Justin Fox, CNN/Time
This story features a man named Prince, an actual (Saudi) prince, a billionaire financial legend, a former Treasury Secretary and a British knight with a German accent. That, plus tens of billions of dollars in losses and a financial crunch that Americans may feel for years.
The man named Prince is Chuck Prince, who lost his job as Citigroup CEO on Sunday, Nov. 4. The immediate precipitating event was $8 billion to $11 billion (they don't know for sure yet) in fresh losses for his company related to subprime mortgages. Stepping down, Prince said, was the "only honorable course for me to take."
Not that he had a choice. Former Citigroup chief Sandy Weill, who created the financial colossus by merging his Travelers Group with Citicorp in 1998, had traveled to Saudi Arabia to tell Citi's biggest individual shareholder, Prince Alwaleed bin Talal, that the other Prince had to go. Alwaleed reportedly wanted Weill to return to the helm, but there was little appetite for that on Citi's board.
Instead, former Treasury Secretary Robert Rubin became chairman, and German-born, London-based Sir Win Bischoff was named acting CEO. A search party of board members is looking for a new boss while, six blocks south of Citi's Manhattan headquarters, the man whom Weill once saw as his obvious successor but booted in 1998, Jamie Dimon, was leading archrival JPMorgan Chase through the credit market's troubles with far less drama.
Almost Shakespearean, no? True, the Bard didn't offer much in the way of collateralized debt obligations (CDOs) or special-interest vehicles--two key sources of Citi's pain. He did, however, understand diversification. "My ventures are not in one bottom trusted, nor to one place," said Antonio, the Merchant of Venice. "Therefore, my merchandise makes me not sad."
Such an insight was supposed to be a great strength of Citigroup, which combined a venerable global bank (founded as the City Bank of New York in 1812) with the upstart financial supermarket that Weill, the Brooklyn-born son of Polish immigrants, put together in the second act of his remarkable career.
Geographical diversification certainly is helping Citi – the company made twice as much money in Latin America as in the U.S. in the past quarter, and did even better in Asia. But while Weill and Prince did make a few big foreign acquisitions, that global footprint is mainly a legacy of the old, patrician Citicorp. What Weill's Travelers added was big-time investment banking, brokerage and storefront consumer finance. And it's from those parts of the business that most of Citi's woes have stemmed.
Before Travelers, Weill had built a small New York brokerage firm into the second biggest in the land, Shearson Loeb Rhoades, which he sold to American Express in 1981. Boxed in at Amex, he quit and later started over with Commercial Credit, a Baltimore consumer-finance company. To that he added Smith Barney, his old firm Shearson, Salomon Brothers and Travelers insurance.
Then came the merger with Citi. It was tumultuous--a power-sharing agreement between Weill and Citicorp's John Reed soon fell apart--but at first very profitable. Amid the corporate scandals of 2001 and 2002, though, Citi's investment-banking arm landed in more than its share of controversy and legal trouble. One last big suit, filed by Enron Creditors Recovery Corp., goes to trial in April.
Prince, a lawyer, became Citigroup CEO in 2003 largely on the strength of his skill in resolving these legal hassles. But he led Citi smack into the next big financial scandal: subprime-mortgage lending. Over the past five years, Citi went from also-ran to leading issuer of the CDOs that take subprime mortgages or other loans and reprocess them into purportedly low-risk securities. Market jitters and ratings-agency downgrades have sent CDOs into a free fall--and now the banks have to account for the losses.
Merrill Lynch, which has also lost a lot of money and a CEO lately, followed a similar path. But Merrill at least began pulling back this year. Not Citi. "As long as the music is playing, you've got to get up and dance," Prince told the Financial Times in July in a quote that will follow him to his grave. "We're still dancing."
The music stopped for good the day Prince resigned, when Citi announced that it had $55 billion in subprime-related securities, mostly CDOs, still on the books. It also disclosed that it's holding almost $135 billion in securities for which there are no observable market prices--meaning that their valuation is determined by guesstimation--and is involved with another $167 billion in off-the-books CDOs and special investment vehicles.
The normally mild-mannered stock and credit analysts who follow the firm reacted with downgrades and criticism--their main complaint being that Citi had been so slow in fessing up to problems that they fear more to come.
"How do you know when management is lying?" began a favorite saying of Sallie Krawcheck, one of the top securities-industry analysts of the 1990s. "Their lips are moving." Now Krawcheck runs Citi's wealth-management division, a bright spot in the most recent earnings report, and she's a dark-horse contender for the top job.
Rubin, already known for the cryptic nature of his utterances at Treasury, seems to have taken her words to heart, letting little slip in public.
Or it may be that figuring out how to restore Citi's luster in the face of a halting economy has left him speechless. After 15 years of mostly flush times and five of downright bingeing, the business of lending may have run into a wall, at least in the U.S. Household debt grew almost three times faster than income from 2000 to 2006. Now the country appears to be tapped out, and a recession may result. Neither of those things is good news for Citigroup.
Find this article at:
http://www.time.com/time/magazine/article/0,9171,1682272,00.html
November 27, 2007
Citigroup gets $7.5 billion
infusion from Abu Dhabi
By Steve Goldstein, MarketWatch
LONDON (MarketWatch) -- Citigroup said it's received a $7.5 billion injection from the Abu Dhabi Investment Authority, a much-needed shot in the arm as the banking giant is weighing massive job cuts and slashing the value of debt securities on its balance sheet.
In a statement late on Monday, said the "long-term" investor will receive no more than 4.9% of its capital and won't get a seat on the board....
The investment comes in the wake of the bank's switch at the top. Chief Executive Charles Prince left early last month after the bank announced huge losses related to the subprime-mortgage crisis.
"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," said Win Bischoff, acting CEO.
"It builds on a series of actions we have taken over the past several months to strengthen our capital base, which have included sales of certain non-strategic assets, the issuance of trust preferred securities, and the previously announced plan to use common stock to purchase 32% of Nikko Cordial...
Citigroup said Monday that it's in a planning process to become more efficient and cost effective as the financial-services giant grapples with billions of dollars in losses from the subprime-mortgage-fueled credit crisis. CNBC reported that the bank is considering 45,000 job cuts, though the bank said no firm number has been determined.
The news of the Abu Dhabi investment gave a huge boost to U.S. stock futures, with Dow industrial futures jumping 111 points on Tuesday morning. It also helped turn financial stocks in Asia and Europe higher...
The investment is one of the largest by a sovereign fund - state-backed investment funds - that are predominantly in Asia and the Middle East.
China took a 9.3% stake in Blackstone Financials for $3 billion, and a plan calls for Borse Dubai to swap the Nordic stock exchange operator OMX...
And the Abu Dhabi holding would exceed the 3.6% controlled by Prince Alwaleed bin Talal bin Abdul Aziz al Saud of Saudi Arabia.
May 22, 2007
US Banks Funding Terrorists
Whistleblower Suicided?
By Wayne Madsen
WMR has received documents sent to one of the presidential campaigns from Leonard D. Wallace, a former business associate of former Enron Vice Chairman J. Clifford Baxter, that provides details of Al Qaeda and the 9/11 attacks being financed through Citigroup/Citibank.
The document states that Baxter, who was to appear before a congressional committee to testify on Enron's dubious business practices, died from a reported suicide on January 18, 2002. According to the document received from Baxter's associate, the former Vice Chairman of Enron was planning to expose Citigroup's knowledge of Saudi banks, some of which it had a financial stake, were funding the terrorists who were responsible for carrying out the 9/11 attacks.
Wallace writes, "this cover-up of criminal misconduct has certainly been perpetrated both at 1600 Pennsylvania Avenue, Washington, DC and at Citigroup's 399 Park Avenue address in New York City." The document goes on to state, "Alberto Gonzales, and the U.S. Department of Justice that he heads, have successfully blocked any investigation of Citigroup, despite evidence that has been presented to them."
Wallace also writes, "I was brought into this spider web of greed and illegality by J. Clifford Baxter, a business associate of mine who was at one time vice chairman of Enron. Through his relationship with Robert Rubin at Citigroup's Chairman's Suite in New York City, in August 2001, I became privy to a series of business transactions planned by Citigroup that I began to realize were not only illegal but also aiding international terrorism from Saudi Arabia. I complained to Citigroup's senior executives and their board, and Cliff told me and others that he was going to expose this bank fraud of Citigroup and Saudi banks. Then, about 30 days after my first letter to Citigroup's chairman, Cliff suddenly died on January 18, 2002 from what is to this day still considered a very questionable suicide."
In a letter dated February 14, 2005 to Attorney General Alberto Gonzales, Wallace presents the background of his case: "I had a prior association in a $1.5 billion armored vehicle project with J. Clifford Baxter, the former Enron executive who died mysteriously in January 2002. As a result of that project, there are two public companies that can corroborate my participation and the integrity with which I conducted myself.
In August 2001, Cliff told me that he was involving me in securing $5 billion in loans and the subsequent investment of these funds. The collateral was to be located at Citibank Singapore, and he said that he would provide me with 4 pages of posting instructions."
The loan deal eventually was handed over to a Citibank Miami vice president -- on September 10, 2001. Wallace writes, "During the next 100 days, up until mid-December, Citigroup, through its headquarters and elsewhere, clearly orchestrated a well-coordinated conspiracy whose major impacts were going to be the defrauding of another bank and the acquisition of ill-gotten gains that would be received and/or distributed to others by Citigroup's senior management. It was represented to me by Citigroup officials and their documentation that the "others" included Account 98 activities, which I later learned were synonymous with the funding of terrorist organizations."
“Citigroup Singapore supplied a false inventory and authentication about Federal Reserve Bonds that supposedly were being used as collateral for the $5 billion loans. Citibank headquarters in Manhattan and Citibank Miami confirmed the authenticity of these bogus bonds. The posting instructions they provided me referred to Account 98s to be managed by unknown operatives in Saudi Arabia at SAMBA Bank, of which Citigroup was a major stockholder." [WMR previously reported on and provided a canceled SAMBA (Saudi American Bank) check written to a group affiliated with Hamas. This editor was personally told by a former chief of Mossad in October 2002 that if one wanted to find out where Al Qaeda received its funding, one would need not look further than the six largest U.S. banks, one of which is Citigroup].
http://www.waynemadsenreport.com/
October 3, 2006
CITI Group Al Qaeda Headquarters
The Bush Crime Family Terrorist Bank
By Stewart Webb, Federal Whistleblower
From The Denver Post
The Bush Millman Clinton Lansky Jewish Mob Connections:
The Deceased Bush Crime Family Denver Boss Hog, Leonard Yale
Millman, was a partner of Meyer Lansky.
Recently obtained evidence indicates the relationship between Millman and Lansky was deeply intertwined for years involving Narcotics Money Laundering, and other illegal activities. Lansky was known to be the head of the MISPUKA-JEWISH MAFIA operating inside the United States. Elaine Millman the New Boss Hogs recently stated the Mossad cleaned me out and shook me down - this is far from the truth.
Elaine Millman still controls $3.5 Trillion Dollars according to the latest accounting.
Senator Hillary Clinton
It is known that Senator Hillary Clinton whose real name is Hillary Rodenhurst Clinton of New York has been acting as a Mossad Bush Crime Family stooge for years.
Iran Contra Operation Eagle
Hillary was involved in Narcotics Money Laundering with George H. W. Bush, Leonard Millman, Ollie North, M&L Business Machines Company of Denver a Millman Cut-out front company that Bankrupted in 1991, involving the Iran Contra Narcotics for Weapons Operations code name Eagle.
Narcotics for Weapons Operation Black Eagle
When Congress outlawed Operation Eagle under the Bolin Act, George H. W. Bush setup Operation Black Eagle, to intentionally hide the Narcotics for Weapons operations from Government Officials and investigators - these illegal operations continue today.
Hillary Clinton laundered Billions in Narcotics Money through M&L Business Machines of Denver, Silverado Savings and Loan of Denver, then the money went oversea to cleans the money, through John Dick in the Isle of Man and the Isle of Jersey to The Compodium Trust Company, (Dick a Denver Resident was a Millman Front) then back under the disguise of Foreign Trusts through Jackson Stephens of Little Rock, Arkansas and the Rose Law Firm where Hillary Clinton was a partner. Then Hillary's money flowed through Morgan Stanley under the name MIApollo Investments Ltd.
The 21 pages of Top Secret Documents proving the $3.6 Billion in Narcotics Money laundering can be found on www.StewWebb.com under US Intel Breaking News.
Denver Attorneys Norman Brownstein, Steve Hoth, Allen Karsh
Many of those Narco-Trusts are now under the Control of Norman Brownstein, Steve Hoth and Allen Karsh, all Denver Colorado Attorneys.
White House Aid Vince Foster
White House Aid Vince Foster a Rose Law Firm Partner was murdered by the Clinton's after it was learned by Bill & Hillary Clinton and Bushes that Vince Foster was working with Defense Intelligence Officer/ Counter Intelligence Leo Wanta who was involved in a Sting Operation of Fugitive Mossad Agent Mark Rich.
Vice President Albert Gore Jr., DIA Leo Wanta, General Vernon Walters and others good guys had compromised Vince Foster who turned States evidence and informant in order to arrest Mark Rich, and bring to Justice The Clintons, Bushes and others involving Iran Contra and other espionage activities against The United States.
Foster was killed after Clinton's learned of this operation. Foster was last seen in the White House having sex with both Clinton's. A yellow pick up truck bearing the Arkansas license number RCG-702 belonging to Hensel-Phelps Construction Company of Little Rock with Headquarters in Greeley Colorado carried Foster's body out of the White House in a Rug and Vince Foster's body was dumped in a park. Helsel Phelps was controlled by Phil Winn, an MDC Director’s brother, and the Mossad.
Hensel Phelps Construction Company A Major Contractor at
Denver International Airport
Hensel Phelps committed massive frauds on Government contracts involving the Airport Construction. Example: Was the $200 million dollar baggage system that did not operate and had to be replaced. Many scams and frauds were done by Hensel Phelps in the Denver Airport Construction.
Leonard Millman and Elaine Millman Organized
Crime Figures and 9-11 WTC
This now not only connected Leonard Millman and his widow Elaine R. Millman who lives at 3333 E. Cherry Creek Drive #70 Denver, Colorado as Organized Crime Figures, Bush Crime Family Boss Hogs Laundering Narcotics Money, but other scandals including Savings & Loan, HUD, Denver International Airport, Securities, Oil & Gas, Government Contract Frauds, Iran Contra and most of the scandals from 1970-2005 including the Latest $10 Billion dollar Pension Fund Frauds.
But this new evidence directly ties Millman’s to the MISPUKA-JEWISH MAFIA, including the financing of the Al Qaeda Terrorist Network involving the Attack on September 11, 2001....
This new evidence ties Bushes, Millman‘s, Clinton‘s, CIA, FBI Division 5 Ted L. Gunderson, DEA, U.S. Customs, U.S. Military, MISPUKA, JEWISH MAFIA, The Queen of England all in Bed Together.
Allen Karsh
Denver Attorney Allen Karsh brother of Organized Crime Figure Elaine Millman, has repeatedly claimed he is the MISPUKA, JEWISH MAFIA. Allen Karsh has repeated this to many in Denver, including Prostitutes in Denver who have provided Allen Karsh sexual services for payment (Prostitution). Allen was divorced from Mary Ann Karsh a wannabe psychologist & Denver gadfly, they had one son. Allen Karsh one of the Mafia attorneys and brother-in-law of deceased Leonard Millman and now runs the daily Crime Family Operations with Boss Hog Elaine Millman.
Allen Karsh has been a major Narcotics Importer into the United States of America for Years, under Karsh Investments at 950 S. Cherry Street, Denver Colorado. Allen Karsh imports narcotics from Mexico to Denver, Colorado each week with Narcotics packed in the seafood, put on ice to cover up the heat from US satellites.
Karsh has a US Customs agent on his payroll that buys off, OKs the loads during inspections, then the Narcotics is sent to Peter Brophy’s Restaurant in Boulder, Colorado for redistribution to various Strip-Bars in Denver, Shot Gun Willies, Proof of the Pudding, and others owned by Leonard Millman, Larry Mizel, Norman Brownstein and Bobby Rifkin.
HUD Fraudsters Phil Winn and Allen Karsh
Karsh also was involved in looting the US Government in the HUD, Department of Housing & Urban Development Scandal of 1989 with The Winn Groups of Denver. Former Switzerland Ambassador 1988-1989 Phil Winn, the former FHA Commissioner from 1981-1982 was convicted and to be sentenced and never served a day in jail after pleading guilty in the HUD Scandal.
In The United States District Court For The District Of Colorado Judge Sherman Finesilver never completed the sentencing of Phil Winn. Sherman Finesilver had been involved in Obstruction of Justice for Leonard Millman and Larry Mizel over many National Scandals. Judge Sherman Finesilver's son was disbarred as an attorney after being caught as a Narcotics Dealer.
Finesilver's son and Neil Bush, George W. Bush's brother were in the Narcotics Business together involving Sun Flow Energy Company. Bill Clinton gave Philip D. Winn a Presidential Pardon. Allen Karsh’s involvement, using Haggaman & Karsh, Karsh & Haggaman, Karsh and Lottner as attorneys of record in the HUD Frauds was never really investigated and covered-up. The Winn Group stole hundreds of Billions from HUD.
AIMCO: The United States Largest Apartment Landlord
Those stolen properties are now under the umbrella of AIMCO a Real Estate Investment Trust (REIT) with over 500,000 apartments in the United States all stolen from HUD.
Asset Investors: a MDC subsidiary company
Phil Winn a Director of Asset investors Colorado’s largest financial institution is an M.D.C. Holding, Inc. subsidiary controlled by Leonard Millman and being run by Larry Mizel, at 3600 S. Yosemite, Denver, Colorado. Allen Karsh and Steve Hoth of the Norman Brownstein Law Office of Denver are in control of the late Leonard Millman Estate. Norman Brownstein is an attorney of record who represents Millman’s companies including MDC Holdings, Inc., CITI Group, AIMCO and many other Illegally gained assets.
CITI Group Al Qaeda Headquarters
MDC Holdings, Inc. owned Silverado Savings and Loan where Neil Bush, George W. Bush’s brother was a director. Norman Brownstein also represents Millman’s, Banks including CITI Corp, also known as CITI Group who was deeply involved with the financing of Terrorist Cells in the United States and paid those involved in the 9-11 WTC, World Trade Center Attack on America. CITI Group is now being called Al Qaeda Headquarters. This is Treason against America, and indictments should immediately be brought.
AIG American Insurance General
Millman’s were further tied to AIG; Millman's were involved with massive frauds and money laundering with AIG and Carl Lindner. Lindner who operated the Chiquita Bananas United Fruit Company ran the Costa Rico Narcotics for Weapons Operations with John Hall and General John Singlaub during the 1980s-1990s.
American Insurance General and CITI Group-CITI Bank
American Insurance General who received 12 subpoenas from New York Attorney General Elliot Spitzer, in connections to the 9-11 WTC financial accounts tied to CITI Group. Marty Greenberg who resigned as CEO of AIG the day the subpoenas were issued worked for Millman’s cut out front company Meyer Blinder, the Worlds Largest Penny Stock Brokerage that collapsed in 1990-1991. MDC Holdings, Inc., operated National Brokerage Group of Companies in the 1980s where Maurice Greenberg was deeply involved with Iran Contra activities, money laundering, stock frauds and manipulations.
Maurice Greenberg, Pete Peterson, Leonard Millman and The CFR
Maurice Greenberg also known as Marty Greenberg took the fifth amendment a few days ago when asked about the 9-11 World Trade Center financing of the Al Qaeda Terrorists. Maurice Greenberg also is a Director of the CAR, Council of Foreign Relations, a New World Order Terrorist think tank, were Leonard Yale Millman was an Honorary Director. Another CFR Director Pete Peterson and Leonard Millman were involved with the Blackstone Group.
MDC-BCCI Bank Of Credit and Commerce International
A series of articles by Time Magazine were done on BCCI.
MDC, Silverado, Lincoln Savings and Millman's were directly involved with the Bushes, in a world wide Terrorist and Money Laundering Operation. That Operation today is known as Al Qaeda. (See: www.stewwebb.com BCCI - and, yes, I did my part in exposing it.)
Adolph Hitler and George H. W. Bush
Remember who first coined the phrase The New World Order - Nazi Adolph Hitler. When George H. W. Bush was President, Bush re-coined the phrase The New World Order, in several speeches. Since Prescott Bush, George W. Bush the White House Occupants, grandfather financed Adolph Hitler during World War 11 through Brown Bothers-Harriman and was charged with Trading with the Enemy Act, I think it would be appropriate given the evidence that I and many others possess of the Atrocities and Espionage activities of this New World Order Bush Crime Family against America, that we could now change the White House Name to Bushes NAZI-Al Qaeda Headquarters.
Al Qaeda is a disgusting ruse, all created to keep the world in a perpetual state of terror! Al Qaeda was created by the Bushes and is a pawn of the New World Order Satanists!
CITI Group and American Insurance General Financed the
9-11 World Trade Center Terrorist Attack!
George H. W. Bush and Leonard Millman’s CITI Group financing the attack on The United States of America on Sept 11, 2001, known as 9-11, WTC, if this is part of The New World Order, then we as Americans need to immediately take control of The White House and the US Government and put an end to The New World Order.
Rather than Hang these Gangsters for Treason and Killing
3,000 Americans for Oil and Money...
I have another suggestion, lets order our troops out of Iraq, and let the Iraq people know we American’s will no longer tolerate such activity of The New World Order Satanists and drop these Goons on the Airstrip at Baghdad Airport.
The Iraq people then will save America a large amount of taxes in funeral expenses for these Nazi Goons.
Who has the Handcuffs?
- Stew Webb, Federal Whistleblower
March 23, 2005
Citigroup, Putnam Pay
SEC Fines Over Fund
In three unrelated cases, federal regulators fined Citigroup Inc. and Putnam Investments $20 million and $40 million respectively and a smaller brokerage firm $100,000 to resolve allegations that they concealed from customers the fact that brokers were paid to recommend certain mutual funds, creating a conflict of interest.
The Securities and Exchange Commission announced the separate settlements Wednesday with Citigroup, the biggest U.S. financial institution; Putman, the seventh-largest mutual fund company, and brokerage Capital Analysts Inc.
Citigroup, Capital Analysts and Putnam, a unit of Marsh & McLennan Cos., neither admitted nor denied wrongdoing as part of the agreements....
December 13, 2004
Citi, Amex Plan Credit Card
By Matthew Goldstein, TheStreet.com
Citigroup and American Express are joining forces to issue a new credit card.
The new card will be issued by Citigroup, but will be accepted by merchants that are part of the American Express network, according to a press release. Citibank will be responsible for handling and billing customers.
The companies did not disclose the financial terms of the partnership.
The deal between the two financial services firms reflects the changing landscape in the credit card business following a federal antitrust ruling against MasterCard and Visa. In a landmark case, a New York federal court found that the two big credit card associations had engaged in uncompetitive business practices that had a negative impact on American Express and other card companies.
The court specifically struck down a rule imposed by Visa and MasterCard that had prohibited member banks from issuing cards from other companies. The Supreme Court, in October, refused to overturn the court's ruling.
In the wake of the court decision, American Express filed suit last month against eight banks that allegedly conspired with MasterCard and Visa to engineer a boycott of American Express' charge card. The lawsuit named most of the nation's major banks, but not Citigroup.
At the time, analysts on Wall Street were puzzled by American Express' decision not to name Citigroup as a defendant.
October 18, 2004
TERROR INC
CITIGROUP’S WORST NIGHTMARE!
A tale of suicide bombers, Saudi princes, cash payments to terrorist groups – and how Citigroup got caught up in all of it.
By Robert Lenzner and Nathan Vardi, Forbes
IN AMERICA’S WAR ON TERROR, cutting of the financial flow to the bad guys is a key goal. But it is a particularly elusive one. Even when a patriotic U.S. bank spots something suspicious, it may be hard-pressed to do much about it.
And so it is that Citigroup, the world’s largest financial institution, finds itself confronting the fact that a bank it partly owned and managed in Saudi Arabia may have funneled thousands of dollars to terror groups and to the families of Palestinian suicide bombers–at the behest of the Saudi royal family.
The allegations involve Saudi American Bank, also know as Samba, the Riyadh-based affiliate in which Citi had a 20% stake. In late 2002 Samba was added as a defendant in a federal lawsuit filed by relatives of Sept. 11 victims against prominent Saudis and charities to which they appeared to be connected.
The suit, prosecuted by Washington, D.C. lawyer Allan Gerson, among others, alleges that Samba “participated in the fundraising campaign in Saudi Arabia for collection donations to the heroes” of the Palestinian uprising. Samba has filed a motion to dismiss.
Now Gerson is eyeing an additional suit against Citigroup and has lined up as possible plaintiffs 150 people who have lost relatives or themselves been injured in terror attacks in Israel....
In May Citigroup set plans to sell its 20% stake in Samba and end its presence in a market it had served since 1955.
Citigroup had run Samba under a management contract since 1980. At one point Citigroup had 30 people at Samba, including the managing director, the treasurer and chiefs of a few departments....
Samba, the second-largest bank in Saudi Arabia, with a 12% share of bank profits in the kingdom, earned $383 million in 2003. It was the linchpin of Citi’s close ties to the Saudi elite. The royal family’s Prince Alwaleed Bin Talal Alsaud, the world’s fourth-richest man, owns $9.4 billion in Citigroup stock and a 7%-plus stake in Samba. Samba’s chairman was billionaire Abdulaziz Bin Hamad Algosaibi, who died last year; his family, too, owns 7% or more of Samba.
Citigroup’s problems began in 2000, when Saudi Arabia’s royal family issued an edict requiring large banks in the country to create a charitable account that would channel donations to “martyrs” of the Palestinian uprising.
The Saudis billed this as a “humanitarian” effort and decreed that each new account would be known as Account 98....
The effort was managed by the Saudi Committee for the Support of the Intifada Al Quds, says a U.S. government official. The committee is run by Prince Naif Bin Abdul Aziz, the interior minister, an official in the Israel Defense Forces says. In October 2000 another royal, Prince Salman Bin Abdul Aziz, governor of Riyadh, encouraged citizens to deposit money in Account 98.
In still another lawsuit a, the Saudi committee is alleged to have funded – through Arab Bank – suicide bombers and Hamas, the Palestinian group that has claimed responsibility for dozens of suicide bombings in Israel in recent years. That suit, filed in July in U.S. district court in Brooklyn on behalf of eight families of terror victims, alleges that $42 million was distributed to “terrorists and/or their beneficiaries.” ... Arab Bank, publicly traded on the Amman Stock Exchange, denies it.
The Saudi government’s role in paying death benefits to relatives of suicide bombers didn’t spark much concern in the U.S. – until after the terror attacks of Sept. 11, 2001. Undaunted, Saudi officials renewed their call for Account 98 donations in December 2001, making an appeal on a government-backed Web site.
Along the way, Israeli officials were gathering evidence about the Saudi-Hamas connection. One lead grew out of a bombing in Tel Aviv on July 1, 2001. Twenty-three people were killed outside a beachfront disco when a man detonated a bomb hidden in a bag he was carrying. Israel fingered a Hamas operative, Abdel Rahman Hamad, as directing the disco blast. Three months later Israeli snipers killed him as he sat reading the Koran on his roof at home in the West Bank.
Hamad’s name surfaced a few months later, as Israeli troops stormed the West Bank offices of the Tulkarm Charity Committee, which the U.S. government calls a Hamas-controlled front. Stored in a Talkarm computer was an Arabic spreadsheet carrying the official logo of the “Kingdom of Saudi Arabia, the Saudi Committee for Support of the Intifada Al Quds.”
The spreadsheet lists Hamad and indicates his family had received 20,000 Saudi yiyals ($5,300). Seized documents show that the Tulkarm group received $545,000 from the Saudi committee and that it funneled funds to 102 families, including eight of suicide bombers.
In late 2002 Citigroup officials asked Samba about Account 98 but got nowhere. Saudi secrecy laws forbid Samba from revealing account records to anyone outside the kingdom. Yet U.S. law prohibits U.S. banks from doing business with Hamas or any other terror group. In early 2003 Citi contacted U.S. Treasury and State Department officials, who spent the ensuing months in talks with the Saudis, worried that Account 98 cash might be going to terrorist activity....
In May Citigroup sold its 20% stake to the Saudi government for a $760 million after-tax gain.
Now the Saudis, at U.S. urging, are phasing out Account 98, folding it and other charity accounts into a single new entity.
The move may, or may not, do anything to stop the flow of money to bombers’ families.
October 8, 2004
THE SECOND PRESIDENTIAL DEBATE BETWEEN
GEORGE W. BUSH AND SEN. JOHN KERRY
Senator Kerry, responding to a question regarding the domestic economy, states that he has been consulting with the former Treasury Secretary in the Clinton Administration – Robert Rubin.
* * *
- For more on the Robert Rubin flock, GO TO > > > AIG: The Un-American Insurance Group; Allied World Assurance; The Chubb Group; Claims By Harmon; Dirty Gold in Goldman Sachs; Dirty Money, Dirty Politics & Bishop Estate; KROLL, The Conspirator; Marsh & McLennan: The Marsh Birds; The Poop on Aon; The Prudential: A Nest on Shaky Ground; RICO in Paradise; Sukamto Sia: The Indonesian Connection; Transylvania Travelers in St. Paul; What Price Waterhouse?; Zeroing In On Zurich Financial Services
October 19, 2004
Fund-Raisers Trade With Iran, Iraq
By Matt Kelley, Associated Press
WASHINGTON - More than two dozen top fund-raisers for President Bush and Democratic challenger John Kerry are current or former senior managers of companies punished for trading with Iran or Saddam Hussein’s Iraq – including the chairman of Bush’s Homeland Security Advisory Committee and Kerry’s fund-raising chairman.
Both candidates say they want the United States to hunt down and kill or capture terrorists. They say those who harbor and finance terrorists are just as guilty. Bush famously described Iran, Saddam’s Iraq and North Korea as an “axis of evil” threatening to give terrorists weapons of mass destruction.
But the tough talk doesn’t address the role of American companies that do business, intentionally or not, with countries such as Iran on the U.S. list of state sponsors of terrorism.
Nineteen people who have raised more than $100,000 for Bush are current or former executives or directors of a dozen firms fined for transactions with Iran and Iraq during the past decade, government records show. Nine top Kerry fund-raisers work or worked for five of those companies. All held their respective positions when some or all of the disputed transactions took place....
“In most of these cases, the violations are certainly not intentional and usually inadvertent,” said Bank of America spokeswoman Shirley Norton. The Treasury Department cited Bank of America or its subsidiaries seven times in the past five years for transferring funds to or operating accounts for people in Iran, Sudan and Cuba.
Bank of America Vice Chairman James H. Hance, Jr., has raised more than $200,000 for Bush’s 2004 campaign.
As for Iraq, Bush has seven and Kerry has three top fund-raisers from companies fined for doing business with Saddam’s government.
One example is Joseph J. Grano, Jr., a top Bush fund-raiser and chairman of the Homeland Security Advisory Council. Grano is the former chariman of an American subsidiary of the Swiss bank UBS AG and was one of the bank’s six executive board members. He now runs a consulting firm, Centurion Holdings LLC.
The bank paid a $14,750 penalty for permitting a 2001 funds transfer to Iraq. UBS also paid a $100 million fine to the Federal Reserve this year after regulators discovered that UBS workers in Zurich traded billions of dollars worth of U.S. currency with Iran, Libya, Cuba and Yugoslavia between 1996 and 2003.
Some of that cash ended up in Iraq, where U.S. troops seized hundreds of millions of dollars last year – some still in wrappings from the New York Federal Reserve Bank....
Another UBS executive with political connections is Blair Effron, a managing director of UBS Investment Bank. Effron is a top fund-raiser for Kerry and co-chairs Kerry’s business outreach program. Robert Wolf, chief operating officer of UBS investment Bank, also raised more than $100,000 for Kerry....
The punished firm with the most extensive links to the presidential candidates is JPMorgan Chase & Co. Two longtime JPMorgan directors are Bush fund-raisers, as are two former and one current executive. Another JPMorgan executive, Nancy Phund, is a top fund-raiser for Kerry.
The Treasury Department’s Office of Foreign Assets Control has cited JPMorgan and its subsidiaries five times for business with Iran in the past decade and once for a $50,000 funds transfer by subsidiary Chase Manhattan Bank to Iraq in 1999....
Both Kerry and Bush also say they’re concerned about Iran’s nuclear programs, which U.S. officials say are designed to make bombs by Tehran says are only to produce electricity.
The 12 punished companies managed by Bush fund-raisers have been cited 27 times for dealings with Iran since President Clinton banned all trade with Tehran in 1995, records of the Office of Foreign Assets Control say. The five punished companies managed by Kerry fund-raisers were cited 12 times for Iran dealings.
One example is Citigroup, which has one Bush fund-raiser on its board of directors and four Kerry fund-raisers in top executive ranks.
Kerry’s campaign finance chairman, Louis B. Susman, is vice chairman of Citigroup Global Markets.
The assets control office cited Citigroup three times for transactions involving Iran and twice for doing business with entities on the U.S. terrorist watch list....
October 6, 2004
BANKING ON ELECTIONS
Finance sector invests
heavily in candidates
By Lucy Komisar, Corpwatch
When Phil Gramm came out of the Tavern on the Green one recent August morning, his disposition turned edgy. The former Texas Senator, the long-time banking committee chair, is now a vice chairman of the Swiss financial corporation UBS.
He’d just passed some pleasant hours hobnobbing with comrades in the money trade, all lured to New York by the chance to make profitable connections during the Republican Convention. But Gramm wasn’t keen on talking to waiting journalists, certainly not to the CorpWatch team. Robert Rubin seemed quite at ease sitting next to Teresa Heinz Kerry at the Fleet Center in Boston, home to the Democratic Convention in July. The Clinton Treasury Secretary, former senior partner at the investment company Goldman Sachs, is now chairman of the executive committee of Citigroup. There was no chance of journalists bearding him in the candidate’s box – at least none who would ask uncomfortable questions.
THERE’S AN OLD LABOR SONG THAT SAYS:
“The banks are made of marble,
with a guard at every door,
and the vaults are stuffed with silver
that the workers sweated for.”
Today, the banks attempt to disarm their critics with patron-friendly public relations like Citibank’s gushy “live richly” campaign, which advises everyone that money really doesn’t matter. What counts are “hugs.”...
So how come Citigroup CEO Sanford Weill, now the company’s chairman, collected $44.6 million compensation in 2003? Robert Rubin pocketed $17 million. These obscenely rich gentlemen must not be reading their company’s ads. (Or maybe the ads are only for the masses.)
Such feel-good promotion masks an industry that is anything but benevolent. And to kill needed regulation for the public good, the banks and financial services companies (that now includes insurance companies, investment firms and stock brokerages) offer big money to the candidates.
THE CASH
According to the Center for Responsive Politics, a Washington-based group that analyzes raw Federal Election Commission (FEC) data, if one combines all finance sector donors (including real estate, accounting corporations, insurance and stock brokers) the combines total contributions to Democratic and Republican parties and federal candidates so far this election season, is a staggering $218 million!
Over the course of his entire electoral career, six out of ten of President Bush’s top lifetime contributors come from the financial sector. In the current presidential campaign, all ten of Bush’s top contributors come from the financial sector (accounting, banking, insurance, stock brokers and investment companies.)
According to summaries provided by the non-partisan public interest group the Center for Public Integrity, contributions to Bush’s campaigns for Congress, Texas governor and the presidency through the third quarter of this year show $353,000 from UBS Financial Services, $445,000 from Credit Suisse First Boston, $505,500 from Merrill Lynch, $493,000 from MBNA Companies, and $343,000 from Goldman Sachs.
On the Kerry side, contributions to the committees of Citizen Soldier Fund, Kerry’s Senate campaigns from 1984-2002, and Kerry’s 2004 presidential campaign through June 30, 2004 included: Citigroup, $226,910; FleetBoston Financial Corp., $202,087; and Goldman Sachs Group $190,750. And not far down in Kerry’s list one can find JP Morgan Chase and Bank of America, which recently merged with Fleet Financial, Kerry’s biggest backer during his congressional career.
Bush and Kerry have four finance sector major donors in common:
JOHN KERRY 2004 CAMPAIGN PATRONS
HARVARD UNIVERSITY
$213,045
CITIGROUP
$169,254
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
$169,225
TIME WARNER
$158,506
ROBINS, KAPLAN, MILLER & CIRESI
$150,250
UBS AG INC
$138,700
GOLDMAN SACHS GROUP
$127, 750
VERNER, LIPFERT, BERNHARD, McPHERSON & HAND/PIPER RUDNICK
$124,152
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPED
$102,051
MORGAN STANLEY DEAN WITTER & CO.
$100,204
=================
GEORGE BUSH 2004 CAMPAIGN PATRONS
PRICEWATERHOUSE COOPERS
$486,600
MORGAN-STANLEY DEAN WITTER & CO.
$486,125
MERRILL LYNCH & CO. INC
$455,904
UBS AG INC
$368,900
GOLDMAN SACHS GROUP
$295,950
CREDIT SUISSE FIRST BOSTON
$271,650
ERNST & YOUNG LLP
$267,105
LEHMAN BROTHERS HOLDINGS, INC.
$263,200
MBNA CORP.
$251,000
CITIGROUP
$246,645
~ ~ ~
... The McCain-Feingold campaign finance law, passed in 2002, banned corporations and unions from giving soft money contributions directly to the political parties. Now only about 10 or 15 percent of contributions to the candidates comes from PACS. Most money comes from individuals who “bundle” their donations of up to $2,000 per candidate to make it clear who and what they represent. Although the campaigns say they voluntarily report who their bundlers are, they are not required to report it to the FEC.
In the Bush campaign, for example, the ten biggest financial services companies have bundlers who collect $50,000, $100,000, $200,000 or more. Often individuals make donations at the suggestion of a bundler in their company....
However, finance has jumped ahead of telecommunications to become Kerry’s largest corporate benefactor, contributing at least $8 million through bundlers. Goldmans Sachs executives account for four of Kerry’s top-ranked bundlers. Also among them is Chad Gifford, former CEO of Fleet Boston and now the Bank of America chairman.
What do banks and their brethern want for the cash?
According to an August 2003 Public Citizen report entitled Bullish of Bush, E. Stanley O’Neal, CEO and chairman of Merrill Lynch, James Cayne, CEO of Bear and Sterns, and Thomas A. Renyi, CEO of the Bank of New York, saved a total of $1.9 million on their personal income taxes thanks to Bush tax cuts.
But far more important than saving on their executive’s personal income taxes, these companies count on financial contributions to encourage politicians to cut dividend taxes and corporate income taxes, to wave through massive mergers, and water down regulations on accounting standards, money laundering, conflict of interest restrictions and other public interest requirements.
For example, in 1999, Kerry used his position of the powerful Senate Finance Subcommittee to support the merger of Fleet and Bank Boston, even though the merger was opposed by local Democratic leaders and resulted in the layoff of 2,500 workers.
George Bush’s favors to finance capital are so numerous it’s difficult to list all of them, but the dividend tax cut, cuts on capital gains taxes and support for the privatization of Social Security are certainly at the top of the list....
FINANCE DE-REGULATION
But the big plum of finance de-regulation occurred in the waning years of the Clinton Administration, under no other than Treasury Secretary Rubin, now at Citigroup.
In this era of giant global companies eating up small ones, the big banks wanted, and they got, the abolition of the Glass-Steagall Act of 1933 which banned mergers of banks and other financial services companies (insurance, brokerage, investment companies) on grounds the mega-conglomerates would create conflicts of interest. While banking regulators and the courts had gradually been eroding the separations that existed in the law, it still remained the last government firewall against global financial oligopoly.
Citigroup was the leading company in the financial services industry that benefitted from the law enacting the abolition. It was called after its chief sponsors the Gramm-Leach-Bliley Financial Services Modernization Act.
Yes, the bankers’ friend, Phil Gramm.
Citigroup lobbied aggressively and had a significant influence in shaping it, according to a source close to the drafting process. It needed the law to legalize its merger with the giant, Travelers Insurance, which was allowed “temporarily” by President Clinton and Federal Reserve Chairman Alan Greenspan, supposedly to allow time for the merged group to come into compliance....
How did Citigroup and its lobbyists get the Senate to rush through the legislation? Roper says it’s the usual Capitol Hill story, “When the people who want the legislation passed make massive campaign contributions and the people who oppose the legislation are nonprofits who don’t make campaign contributions, the deck is stacked in favor of passage.”
Citigroup took the lead in proving the critics right. Decisions about lending and investment banking were tied to recommending client company stocks to investors. Regardless of the worth of the stock, Wall Street brokers would hype stocks in order to get companies to give them investment banking business. Financial regulators, as critics had warned, proved utterly unable to prevent these problems.
Caught in the crooked act, Citigroup was one of ten major Wall Street firms that agreed to pay a record $1.4 billion in 2002 to settle charges that they inaccurately and unfairly promoted stocks of companies that gave their firms lucrative underwriting contracts.
Among the President’s top supporters are eight of those firms: Merrill Lynch, Morgan Stanley, UBS America, Goldman Sachs, Credit Suisse First Boston Corp, Lehman Brothers and Bears Stearns. All were accused of knowingly dispensing false stock market advice. In settling the case they admitted no wrongdoing. But prominent personnel at some of the firms, including Merrill and CSFB, have also been criminally prosecuted.
Kerry’s top ten presidential campaign donors include 3 of the same donors, UBS AG Inc., Goldman Sachs, and Morgan Stanley Dean Witter & Co.
Kerry’s number two largest donor as of September 7, 2004: Citigroup.
Despite the big financial backing from finance, not all banking reformers have given up hope on Kerry. When the Neighborhood Assistance Corporation of America (NACA), ran a campaign against Fleet bank for engaging in predatory lending against low-income home owners, Kerry voted for a bill to regulate predatory lending.
NACA president Bruce Marks says that there was a concern at one point that Kerry was defending Fleet. Marks says, “We met with him, and he was fine. We never saw him being out there aggressively supporting Fleet.” He says, “Kerry has been on the right side with the consumer on the banking issues [such as] predatory lending and disclosure.”
Could the Kerry administration turn in a better record on oversight to the finance industry than the scandal plagued years of the Bush administration or the give-away era of the Clinton Administration?
Perhaps, but maybe we’d better find out just what Citigroup’s Rubin is whispering in Kerry’s ear.
October 20, 2004
CITI BOOTS 3 OVER JAPAN SCANDALS
By Paul Tharp, New York Post
Heads began rolling among top brass at Citigroup over its private banking scandal in Japan – including its superstar Vice Chairman Sir Deryck Maughan and two other key officials.
The shakeup came yesterday just a week after Citigroup chief Charles Prince announced he was “personally hurt” over the alleged money laundering affair at its private banking business in Japan.
Prince said in an internal memo at the world’s biggest bank that Maughan, 56, would be leaving along with Investment Management head Thomas Jones and Peter Scaturro, who ran the company’s big private bank.
The British educated Maughan - who owns more than $70 million in Citigroup stock - has spent 21 years with the organization and its predecessor companies, having started as a broker in 1983 at the former Salomon Smith Barney.
Prince last week reacted angrily to the Asian scandal, telling a news conference:
“In Japan, our private bank did not do the right thing. We have people who violated the ruled, violated external rules ... [and] despite very significant preventative efforts, we once again found ourselves with people who did the wrong thing, hurt customers and put the franchisee at risk.”...
Officials in Asia ordered Citigroup to shut its private banking office in Japan after failing to conduct proper checks against money laundering.
Regulators in South Korea said they had uncovered fraud in Citigroup’s retail bank in Japan.
A total of 48 branches in Asia are under investigation over possible overseas transfers of up to $1.4 billion, including currency transactions.
Last month, Citigroup also apologized for several European bond sales that triggered a probe by regulators in Britain.
August 26, 2004
Citigroup Sued Over Enron Scandal
NEW YORK (Reuters) - Citigroup Inc. faces a lawsuit from angry investors who allege they were defrauded in a “massive scheme of deception” when they bought securities tied to the credit-worthiness of bankrupt energy trader Enron Corp.
The suit, brought by Bank of New York Co. Monday in New York State Supreme Court on behalf of numerous investors in Enron-related securities, is the latest in a spate of actions at recovering billions of dollars lost when the Houston-based company collapsed into bankruptcy in 2001.
Plaintiffs include well-known distressed debt funds Angelo Gordon & Co. and Appaloosa Investment LP, who charged in the 77-page complaint that Citigroup concocted a fraudulent scheme to raise billions of dollars from the sale of notes called “Yosemite” securities.
Citigroup, the investors said, then used the funds to make “disguised” loans to Enron “to reduce its own Enron credit risk, prop up Enron’s failing financial condition and generate significant fees in the process.”
The complaint alleges fraud, breach of contract and fiduciary duty, and negligence in the Yosemite transactions, which it said took place between 1999 and 2001. Enron sought Chapter 11 bankruptcy protection on Dec. 2, 2001....
A successful lawsuit might complicate Citigroup’s plan to keep its already high legal costs from rising further.
The company in May roughly quadrupled, to $6.7 billion, its reserves for legal bills, including those for Enron, as it agreed to pay $2.65 billion to settle a lawsuit by WorldCom Inc. investors accusing it of participating in financial fraud.
Citigroup Chief Executive Charles Prince said at the time, “We feel very comfortable in saying that, with our advisers helping us, we have established a reserve that will cover all of our meaningful exposures.”
Reducing exposure
In their complaint, the Yosemite investors said Citigroup knew Enron’s debts were several billion dollars greater than the company publicly disclosed between 1999 and 2001.
They also said the bank wanted to cut its own, rising exposure to Enron. Though Enron was an investment-grade company until just four days before it filed for Chapter 11 bankruptcy, the complaint said Citigroup, because of undisclosed information it possessed about Enron, knew that defaults were “likely.”
“Citibank thus found itself in a bind. It knew Enron was not loan-worthy, yet if it failed to find Enron new sources of financing, it ran the significant risk that Enron would collapse before Citibank could recover the billions of dollars Enron owed it,” the complaint said.
“The Yosemite transactions were Citibank’s solution to its problem.”...
August 13, 2004
United Health, Citigroup unit settle Medicare fraud claim
By Chad Bray, Dow Jones News Service
NEW YORK – Two insurers have settled civil Medicare fraud charges by the U.S. attorney’s office in New York City for $20.6 million, the government said Thursday.
In a news release, prosecutors said the Travelers Insurance Co., a life insurance unit of Citigroup Inc., and United Healthcare Insurance Co., a unit of Minnetonka-based UnitedHealth Group Inc., agreed to settle the case without admitting wrongdoing.
Under the terms of the settlement, Travelers will pay $10.9 million, while United Healthcare will pay $9.7 million.
“The Travelers Insurance Co. decided to settle in order to avoid the distraction of further litigation, and denies any wrongdoing in the case,” spokesman Bob Nolan said in a prepared statement. “Today’s settlement announcement closes a chapter on an issue that dates back almost a decade.”...
The government had claimed that Travelers, between October 1988 and January 1994, inflated its cost reimbursements well above its actual expenditures under the Medicare program in order to obtain higher reimbursement and greater performance incentive payments.
Travelers was the fiscal intermediary for the Medicare Part A program in portions of Connecticut, Michigan and New York; the Medicare Part B carrier for Connecticut, Minnesota, Mississippi and Virginia; the Railroad Retirement Board carrier nationwide, and the Durable Medical Equipment carrier for Connecticut, Michigan and New York.
United Healthcare took over those contracts in January 1995 and continued the improper billing practices through December 2000, prosecutors said.
July 30, 2004
Parmalat seeks $10 billion in Citigroup fraud case
By Christian Plumb, Reuters
MILAN - Parmalat is seeking more than $10 billion in damages from Citigroup in a lawsuit that accused the U.S. bank of helping defraud the Italian food firm and its shareholders and creditors of billions of dollars.
The new administration of Parmalat said in the lawsuit filed on Thursday that “the top leavels” of the world’s leading financial services group played a crucial part in the multi-billion euro fraud that plunged the company into insolvency in December.
“Citigroup engaged in a series of transactions with Parmalat or its subsidiaries whose only economic purpose was to enrich Citigroup, at the ultimate expense of Parmalat,” according to the lawsuit, filed in the U.S. state of New Jersey.
“Citigroup’s transactions with Parmalat were knowingly designed to assist Parmalat in a broad, continuing series of fraudulent transactions,” it said.
Citigroup declined comment of the specifics of the suit ... But it said it had been the victim of fraud perpetrated by Parmalat.
“Citigroup lost hundreds of millions of dollars as a result of Parmalat’s fraudulent conduct, and we will continue to pursue our substantial claims against the company and defend against frivolous claims in search of a deep pocket,” the bank said....
“APPROVED AT TOP LEVELS”
Citigroup also created a special purpose vehicle called “buconero” - Italian for black hole – used for loans among units in the Parmalat group.
The lawsuit says Citigroup designed and structured deals that helped “a few culpable members of Parmalat’s management hide Parmalat’s mounting debt, artificially improve its reported cash-flow and manipulate Parmalat’s financial statements.”
The transactions “were all approved at the top levels of Citigroup and required the coordination of different groups at Citigroup throughout the world, from New York, to New Jersey, to England and Italy itself,” according to the suit.
Saying $8 billion was “lost, stolen or wasted” with Citigroup’s help, the 65-page complaint named a number of bank employees, including a Citibank managing director, who it alleged had helped with the fraudulent transactions.
In addition to fraud, the suit accuses Citigroup of diversion of corporate assets, unjust enrichment, deepening Parmalat’s insolvency, unlawful civil conspiracy and racketeering.
Parmalat’s losses of more than $10 billion were a direct result of the fraudulent activity, the suit said, asking the U.S. court for “an award of damages for all of the losses.”
Citigroup had previously been named in at least two class action suits brought by Parmalat investors in the United States.
Bank of America, which Milan prosecutors have asked a judge to bring to trial of fraud charges along with Parmalat’s former executives and auditors, could not be reached for comment.
Several other Italian and foreign banks are being probed to see how much they knew about Parmalat’s finances when they did business with its ex-management.
Deutsche Bank said there had been no damage claims filed against it over Parmalat. A source at the bank said it was in close negotiations with both Italian and German regulators, Italian prosecutors and Parmalat’s Bondi.
A spokesman at Morgan Stanley declined to comment....
July 23, 2004
The Enemy Within
By Seth Lubove, Forbes
Riot police fired rubber bullets and tear gas at protesters in Rio de Janeiro in 1998 when Brazil broke up and privatized its massive state-owned monopoly phone system, Telebras. For Brasil Telecom, one of the original Telebras companies, the fighting hasn’t stopped since.
In a transatlantic feud that has landed in courts and government agencies on three continents and the Caribbean, and sullied the reputations of Citigroup (nyse: C) and now, potentially, J.P. Morgan Chase’s star investment banker Jimmy Lee, Brasil Telecom and its feisty Italian-born female boss have waged a fierce battle over control of the company with its second largest shareholder, Telecom Italia. The Italian communications conglomerate owns a 19% stake in the holding company that controls Brasil Telecom, although even that amount is the subject of a furious battle over whether the Italians can increase their stake to their original 37%, before regulatory requirements forced the company to reduce its holdings.
“This is a breach of the fiduciary duty a shareholder has with a company,” complains Brasil Telecom Chief Executive Officer Carla Cico, 43, referring to Telecom Italia’s war of attrition, the subject of various arbitrations, lawsuits and regulatory actions. “The result today is Brasil Telecom’s stock is undervalued.”...
Now, a fresh firestorm has erupted over allegations that Brasil Telecom hired private investigators at Marsh & McLennan’s Kroll unit to spy on Brazilian government officials and look into whether Telecom Italia has conspired to secretly undermine Brasil Telecom so it could take the company over on the cheap.
Both Kroll and Brasil Telecom acknowledge Kroll was hired, but say media reports that Kroll spied on Brazilian officials to check if they were aligned with Telecom Italia are bogus.
“Brasil Telecom never asked Kroll to investigate any member of Brazil’s government, and we never did,” said Kroll’s regional managing director for Latin America, Andres Antonius, in a statement....
Forbes obtained a copy of the Kroll report and related summaries. The 44-page report includes no reference to government officials. Among many other things, however, the report does allege that J.P. Morgan Chase, and Vice Chairman Lee, aided Telecom Italia in a conspiracy campaign by arranging a secret financial transaction that helped to further undermine Brasil Telecom.
Kroll claims in the report and in related summaries that Chase orchestrated a complicated financing scheme with a separate company in 2000 that allowed Telecom Italia to swoop in and buy out a corporate network services company that Brasil Telecom was set to acquire for itself, despite the fact that Telecom Italia participated in Brasil Telecom’s board discussions about the acquisition.
The network services company, Vicom, was instead acquired by something called Globo Cabo (now Net Services), a Brazilian cable operator that Telecom Italia had been “secretly” negotiating with, according to a summary of the Kroll report.
In March 2000, Telecom Italia met with Globo to discuss a deal in which Globo could invest in Brasil Telecom if Telecom Italia was successful in taking the company over, a violation of Brasil Telecom’s shareholder agreement, according to the report....
According to the summary of the Kroll report, Chase “benefited from the fraud” by earning fees and shifting the risk associated with the financing of the venture away from Globo to Telecom Italia’s stronger balance sheet, while also obfuscating Globo’s debt ratings....
Citigroup, meanwhile, has been dragged into the mess due to its investment, reportedly $700 million, in DVC/Opportunity Partners (as in “Citigroup Venture Capital”), a Brazilian fund that invests in newly privatized industries. The fund, in turn, owns a controlling stake in the holding company that ultimately controls Brasil Telecom, and which is aligned with management against Telecom Italia.
Much to the American bank’s likely aggravation, Citigroup’s name has been regularly trotted out in stories about the feud, despite the bank’s contention that it has no “controlling interest” in Brasil Telecom, according to a spokesperson who otherwise declined to comment on the feud....
For more on Kroll Associates, GO TO > > > KROLL, the Conspirator
May 11, 2004
Citigroup To Pay $2.65 Billion in WorldCom Fraud Settlement
By Gretchen Mortgenson, The New York Times
Hoping to close the books on its role as lead banker to WorldCom, Citigroup agreed Monday to pay $2.65 billion to investors who bought stock and bonds in the telecommunications giant before its bankruptcy filing two years ago.
The payment is the largest ever by a bank, brokerage firm or auditor to settle a fraud case brought by investors who bought securities issued by a corporation that was advised by one of those firms. It is the second-largest amount ever paid to settle a securities class action, trailing Cendant Corp.’s payment of $2.85 billion in 2000.
The Citigroup settlement, which must be approved by the court, came just hours before an appellate court was to hear arguments addressing among other things, the conflicts between the firm’s stock analysis and the investment banking fees generated by WorldCom. The Securities and Exchange Commission had filed a friend of the court brief supporting the investors’ claims.
Litigation continues against the defendants: WorldCom’s former officers and directors, other banks and brokerage firms that sold WorldCom securities, and Arthur Andersen, the company’s auditor at the time.
Tens of billions of dollars in investor wealth vanished when WorldCom collapsed in July 2002, and Monday’s settlement is the first indication of how much money may yet be paid by the people and firms that helped the company sell its securities to investors. In 1999, when the stock was at its peak, WorldCom had a market value of more than $150 billion.
“This settlement, while historic, is only the first step,” Hevesi said. “We will continue to pursue our claims against the others who bear responsibility for the debacle at WorldCom. The investing public depends on the gatekeepers, and the gatekeepers have to be diligent in making sure investors get accurate and truthful information....”
/\0/\
March 17, 2004
THE MISSING WORD IS “CORRUPTION”
From The New Republic Online
Buried in the financial pages this morning is news that, last year, Sanford Weill of Citigroup was paid $44.7 million – that being the year he lost his CEO position owing to the many scandals the company has been embroiled in. Further buried in the financial pages is news that, last year, Weill realized $262.4 million from exercising stock options or selling accumulated stock back to Citigroup. Sanford Weill took home $330 million last year for sitting in a chair at the top of a troubled company.
There’s a word for this, and the word is corruption.
Set aside the regulatory problems and ethical lapses that have characterized Citigroup under Weill’s leadership: the $400 million fine the company paid in 2002 for fishy dealings; the $1.5 billion write-off the company took in 2002 for the federal fine and “toward estimated costs of the private litigation” arising from its deceptive stock practices; the fact that Citigroup was humiliated when Weill tried to get himself onto the board of the New York Stock Exchange – then run by the greedy Dick Grasso – at the same time Citigroup was agreeing to Securities and Exchange Commission sanctions. ....
Set all this aside and assume for the sake of argument that Weill’s name was not tainted. ... How could anyone at all sitting in a chair and signing memos be worth $44.7 million in a single year? Did Weill have some blinding insight that was without precedent in business history? Did Weill engage in some brilliant masterstroke? Citigroup’s overall strategy differs only in minor respects from that of its major competitors. ... If an orangutan had been the company’s CEO in 2003, its share prices probably would have risen.
Did Weill do any unusually good job of attending meetings, schmoozing at lunch and signing memos? Even if he did it’s impossible to justify $44.7 million for a single year – bearing in mind that this money does not pop out of the air. Weill’s big payday for 2003, or his accumulated $330 million haul, is money that could otherwise go to Citigroup shareholders as dividends, while the portion that is stock grants or exercised options both dilutes the value of shares held by existing shareholders and represents shares the company might have sold to raise equity – the reason stock exists in the first place – but instead gave away to Weill.
Last year Weill was paid $110,000 per day, The New York Times calculates in a piece that was buried in the financial pages. That is grotesque....
Jeffrey Toobin observes in the current New Yorker of today’s CEO ethos: “They took credit when the nation’s economy made almost every business leader look good, and blamed the fates when times turned hard. Many were, in essence, lavishly paid bureaucrats – caretakers rather than creators.” The $1.5 billion Citigroup wrote off in 2002 for Weill’s mistakes came out of the pockets of shareholders, but was presented by the company as just the vicissitudes of the fates. Immediately Weill resumed shoveling shareholders’ money back into his pockets.
Corporate CEOs should be paid more than cab drivers, and many CEOs make important contributions to society. But there’s a word for grabbing $44.7 million for less than a year’s time sitting in a chair, and the word should be corruption.
Where is the locus of the problem in this case, with Weill personally or with the company board that approved his grotesque exercise in avarice? The company board had to vote to say, in effect, that there was no qualified person willing to sit in the Citigroup chair for less than $44.7 million.
Big-company boards are composed mostly of people who benefit personally by driving up executive pay; 11 of Citigroup’s 16 active board members are chairmen or CEOs of big companies. If they throw absurd amounts at the Citigroup CEOs, this makes it easier for them to argue that their own companies should throw absurd amounts at them. Benefitting personally from your decisions about other people’s money is called corruption.
It’s past time that greedy men like Weill stopped grabbing grotesque sums at the expense of common shareholders, and it’s past time newspapers and politicians stopped using euphemisms like “compensation” and called this what it is, corruption....
www.tnr.com/easterbrook.mhtml?week=2004-03-16
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August 5, 2003
Citigroup, Morgan Chase fined for Enron deals; corruption at the heights of American finance
By Joseph Kay, www.wsws.org
Citigroup Inc. and JP Morgan Chase & Co., the largest and second largest US banks respectively, reached an agreement July 28 with the Securities and Exchange Commission (SEC) to pay a combined $255 million in fines in connection with their involvement in the fraud perpetrated by Enron.
JP Morgan will pay $135 million and Citigroup will pay $120 million to the SEC. In addition, both banks reached a settlement with the Manhattan district attorney that includes an agreement to pay $12.5 million each to New York City and New York State.
The SEC charged that the two banks aided defunct energy trading giant Enron in disguising loans as cash in order to defraud investors. In December 2001, Enron filed what at the time was the largest corporate bankruptcy in US history.
Having sustained itself on the basis of fraudulent accounting practices and illegal financial manipulations, Enron – which had the closest ties to President George W. Bush and other officials in his administration – has become a synonym for corporate criminality. The revelations of the fraud carried out at that company initiated a wave of accounting scandals – including those at WorldCom, Tyco and other firms.
The involvement of the banks in these scandals reveals that the corruption that has come to light over the past several years is not simply a matter of a few “bad apples,” but rather involves the entire corporate and financial elite....
The government is hailing the settlement as a great victory. ... Manhattan district attorney Robert Morgenthau stated that the settlement sent a signal: “No more phony baloney offshore special purpose vehicles that are not understandable.”
However, the settlement will have little real consequences for the operations of the banks. They have promised not to engage in such prepay deals in the future unless the client companies practice full disclosure. Both Citigroup and JP Morgan agreed to put in place tighter risk management controls, but purely on an internal level. According to these new controls – which must be submitted to the Federal Reserve for approval – senior executives will have to exercise greater oversight of complex financial arrangements.
There are no provisions for government oversight of banking operations, and no enforcement mechanisms or consequences if the banks do no comply.
As a sign that investors considered the settlement a win for the banks, stock prices rose for Citigroup and JP Morgan the day the agreement was announced.
/\0/\
June 10, 2003
STUDY GIVES CITIGROUP BOARD
LOW MARKS
The board of directors at financial services giant Citigroup ranks worst overall when it comes to the effectiveness of corporate boards, an independent governance monitor said yesterday.
Taking a close look at America’s 1,700 largest companies, the Corporate Library assessed the ability of their boards to provide effective oversight, and found chief executive compensation to be one of the most significant indicators of who’s in charge.
In addition to Citigroup, the worst performers were Allstate Corp., Emerson Electric Co., Gemstar-TV Guide and Honeywell International.
Citigroup defended itself yesterday, saying its “independent and active board has been a source of strength as the company has grappled with highly complex issues while simultaneously delivering record values for all its shareholders.”
Rounding out the 10 worst boards are J.P. Morgan Chase, Loews Corp., SBC Communications, Verizon Communications and Walt Disney Co....
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May 8, 2003
The Wall Street Fix
Last week, when New York State Attorney Eliot Spitzer, SEC Chairman William Donaldson, and other regulators charged 10 of Wall Street’s biggest firms with fraud and announced a $1.4 billion settlement – the biggest in Wall Street’s history – they looked into the cameras and spoke of “restoring investors’ faith and confidence.”
But what has really been learned from the seemingly endless scandals that have rocked Wall Street and shaken the markets for the past two years? How many investors understand how Wall Street really does business, and how it fueled the bubble during the 1990s?
In “The Wall Street Fix,” FRONTLINE correspondent Hedrick Smith looks inside the culture of Wall Street and the world of investment banking, investigating the hidden relationships between the Street’s biggest bank, Citigroup, and the bubble’s most spectacular failure, WorldCom. Focusing on the story behind Worldcom’s incredible rise and fall – and the relationship between its CEO Bernie Ebbers, and Citigroup’s star telecom analyst Jack Grubman – Smith shows how Wall Street drove the telecom boom, pocketing enormous profits, and then took millions of investors on a ride that eventually cost $2 trillion in losses on WorldCom and other telecom stocks.
“Jack Grubman and Salomon Smith Barney were essential enablers for WorldCom to take off,” says Scott Cleland, CEO of the Precusor Group, an independent research firm specializing in high tech and telecom. “It took a rising stock price. It took some very good investment banking, and some very good salesmanship in order to sell the marketplace [on the company].”
The key to these relationships between up-and-coming companies and investment banks, industry insiders say, were the Wall Street analysts who were supposed to provide investors with objective recommendations on which stocks to buy. The analysts, however, worked for the investments banks, and instead of issuing objective reports, these analysts were helping their employers secure the lucrative banking business of the companies they were supposed to be objectively covering.
“What we found was that analysts were involved from the very beginning of the investment banking relationship – going out there, soliciting a client, promising that if you bring your business to our firm, we will take your company [and] proclaim to the world that it is the best thing since sliced bread,” asserts Spitzer.
“It wasn’t just one corrupt individual,” he adds. “It was an entire business model that was flawed....”
The report also looks at the relationship between Grubman and Citigroup CEO Sandy Weill and how Weill’s creation of the nation’s first “superbank” in 1998 – merging Salomon Smith Barney with Citibank, a giant commercial bank, and Travelers, an insurance giant, under one corporate umbrella – contributed to the conflicts of interest addressed in last week’s settlement.
The merger that created Citigroup was made possible by Federal Reserve Board decisions in the 1980s and 1990s, and by Congress’s eventual repeal in 1999 of the Glass-Steagall Act, a 70-year old law aimed at protecting investors by separating investment and commercial banking.
“The repeal of Glass-Steagall was a big deal because it enabled the kind of colossal combinations that just weren’t envisione