Sprawling financial supermarket Citigroup yesterday told the U.S. Disctrict Court that a $75 million fine it agreed to pay the Securities Exchange Commissioin is an adequate sum to settle charges that it failed to disclose $39 billion in subprime assets in 2007.
Last week, the SEC defended the very same settlement agreement to U.S. district judge Ellen Segal Huvelle, who has asked both sides to persuade her why the agreement is worth a damn. Huvelle has raised concern that the fine would unfairly penalize current shareholders for an alleged 2007 transgression, and also said it was weird that the SEC singled out former CFO Gary Crittenden and former head of investor relations Arthur Tildesley Jr. as the main perps in its case. Each ex-manager has separately settled charges by paying less than $100,000 in fines.
“There has been nothing here that is being done to assure anyone that senior management who’s responsible, whatever level of culpability you’re talking about, is going to have any pain here,” Huvelle said on August 16. Not exactly a ringing endorsement of the SEC’s efforts.
Citi said that the $75 million fine is sufficient because the SEC didn’t accuse the company of mismanagement or misallocation of assets. As for leveling charges against Crittenden and Tildesley, the SEC said that those were the two people most responsible for the disclosures. Citi lawyers said charging the pair, instead of the whole company, showed that the SEC’s allegations were without merit.
At the same time, Citi’s lawyers are also asking the court to authorize the settlement, and also claim that the bank was incompetent in judging risk, not outright deceitful.
To recap: The SEC may have mishandled its charges against Citi, Citi admits it misjudged the assets in its portfolio, and an exasperated Judge Huvelle has to decide whether or not to let this feeble proceeding should simply end, whether or not justice has been served.