Citigroup

Citibank was founded in 1812, and is now one of the world's leading financial services companies. The Citigroup has over 200 million customer accounts in more than 100 countries.

Other major brand names in Citi's diverse portfolio include Citi Cards, CitiFinancial, CitiMortgage, CitiInsurance, Primerica, Diners Club, Citi Private Bank, and CitiCapital.

Controversies

WorldCom Scandal

In 2004, Citigroup agreed to pay $2.6bn (£1.4bn) to settle a class action suits accusing the financial institution of participating in fraud with WorldCom, the phone company now known as MCI.

Shareholders have sued Citigroup after the collapse of WorldCom amid allegations surrounding a former telecom analyst Jack Grubman, who was found to be hyping WorldCom and other hi-tech stocks.

WorldCom filed for the biggest bankruptcy in history in July 2002 with allegations of accounting irregularities and Mr Grubman was consequently fined $15m and barred from the securities industry for issuing misleading research.

Citigroup explained that it had agreed to settle federal class action suits brought on behalf of those who had purchased WorldCom stock from April 29, 1999, to June 25, 2002.

In response, Charles Prince, Citigroup's Chief Executive, claimed the settlement was part of an ongoing effort "to put an unfortunate chapter behind us".

Global Crossing

Similarly, in 2005 Citigroup paid $75m (£39.2m) to settle a class-action suit brought over its role in the collapse of telecom network Global Crossing.

Citigroup was accused of issuing exaggerated research reports and failing to highlight conflicts of interest in the three-year-old case.

European bonds

The group was also ordered to pay almost £14m to the Financial Services Authority for its role in a controversial trade in the government bond markets in 2004.

The firm is being forced to hand over £9.9m of profits from the trade and pay a £4m fine due to its failure to control its bond business. This is the second largest financial punishment handed out by the City regulator after oil company Shell was fined £17m in 2003.

The strategy involved using the MTS electronic trading system to sell as many bonds in 18 seconds as would normally be traded in one day. A trading error then forced Citigroup to buy back some of the bonds it had sold.

The banking group escaped more action after the FSA concluded it had not deliberately tried to distort the bond market when the trades took place on August 2. However, the scandal has damaged Citigroup's reputation and it has now been excluded when European governments have considered bond issues.

Citigroup and Japan

Japan's market watchdog ordered Citigroup to close its private banking operations in the country. Regulators said they discovered a range of problems at Citigroup's private banking arm, from improper trading practices to insufficient anti-money laundering procedures.

Japan's Financial Services Agency ordered the group to suspend new private banking business, and gave it one year to close all accounts at the four branches. They will have their licences revoked on 30 September 2005.

Among its charges, the FSA said the bank had brokered deals on such items as artworks without properly informing customers of the risks. It also allowed transactions which "could be suspected of being associated with money laundering".

"In a management environment in which profits are given undue importance by the bank's headquarters, a law-evading sales system that disregards the laws and regulations of Japan was constructed," the FSA said. Bank managers were also guilty of "obstructing inspectors", and responses to official inquiries "differed from the truth".

Manipulating prices

In May 2015 Citigroup, JPMorgan, Barclays and RBS were found guilty of manipulating the price of US dollar and euros and fined nearly $6 billion between them. US authorities discovered that between December 2007 and January 2013 traders at the banks had referred to themselves at 'The Cartel' in chatrooms 'where they used coded language to set benchmark rates'. During a trial period, one Barclays trader was even told 'mess this up and sleep with one eye open at night' with another Barclay's trader, in November 2010, saying 'if you ain't cheating, you ain't trying'. Citi will pay $925 million in criminal fines as part of their guilty fines.

Revolving door

USA

Christine Burgeson, Vice President of Federal Affairs at Citigroup Inc is a former Legislative and Congressional Affairs Advisor to the White House and the Office of Management and Budget.

Nicholas Calio, Citigroup’s Executive Vice-President for Global Government Affairs, was Legislative and Congressional Affairs Advisor to the White House from 2001 to 2002.

Michael Froman, deputy assistant to the U.S. president and deputy national security adviser for international economic affairs, was previously managing director of Citigroup’s Citi Alternative Investments Institutional Clients Group.

Wendy Grubbs, who joined Citigroup in 2004 as Vice President of Federal Government Affairs was previously a White House Liaison to Senate from 2001-2004.

UK

Michael Kirkwood, a Non-executive director at UK Financial Investments, was chief country officer for the UK at Citigroup Inc from 1999 to 2008.

Ivan Rogers, former Principal Private Secretary to the UK Prime Minister was Managing Director and Senior Coverage Officer for the UK Public Sector at Citigroup until 2010, when he moved to Barclays Capital. In October 2011 he was appointed the Prime Minister's Adviser for Europe and Global Issues and the Head of the European and Global Issues secretariat, based in the Prime Minister's Office at Number 10 Downing Street.

Robert Schellhas, who joined Citigroup in 2003 as Vice President of Federal Government Relations, was previously Chief of Staff to U.S. House Representative Rob Portman.

Charitable work

• Partners with the Cherie Blair Foundation for Women.

Contact

London HQ: Citigroup Centre, Canada Square, London E14 5LB
Website :http://www.citigroup.com/citi/homepage/

This article is part of the Revolving Door project of Spinwatch.

References

• BBC News, "Japan closes Citigroup branches," 17 September 2004, accessed 30 December 2010.
• Business Wire, "Citigroup Names Nick Calio to Lead Global Government Affairs," 18 December 2002, accessed 30 December 2010.
• Citigroup, Our Legacy, Web Archive 20 March 2008, accessed 30 December 2010.
• Guardian, "Citigroup settles WorldCom fraud suits," 10 May 2004, accessed 30 December 2010.
• Guardian, "Watchdog fines Citigroup £14m," 29 June 2005, accessed 30 December 2010.
• Harvard Law School, "Michael Froman ’91 joins White House in joint security, economic post," 03 February 2009, accessed 30 December 2010.
• Independent, "Top civil servant joins Citigroup," 24 March 2006.
• OpenSecrets, Burgeson, Christine, accessed 30 December 2010.
• OpenSecrets, Grubbs, Wendy, accessed 30 December 2010.
• OpenSecrets, Schellhas, Robert, accessed 30 December 2010.
• UK Financial Investments Ltd, UKFI Board - Michael Kirkwood, accessed 30 December 2010.