Citigroup

Profile

Citibank was founded in 1812, and is now one of the world's leading financial services companies. The Citi Group 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".