SEC launches internal probe into Citigroup settlement

13 January 2011

The Securities and Exchange Commission (SEC) has launched an internal investigation into allegations that Citigroup was provided with preferential treatment in a settlement with the bank reached during last year.

A probe was launched after an anonymous letter was sent to US Senator Charles Grassley claiming that the SEC had dropped charges against two individuals as part of a $75 million settlement the bank paid in 2010.

The letter, which the senator passed onto the SEC, alleged that enforcement director Rob Khuzami agreed that charges against the two Citigroup executives be dropped after a conversation with a defense lawyer.

According to the message, a private lawsuit was avoided as the representative for Citigroup was a “good friend” of the director.

John Nester, spokesman for the regulator, said: "The settlement appropriately held the company and individuals accountable. It was the product of a thorough investigation and a careful evaluation of the evidence and the applicable law.”

Citigroup agreed to pay $75 million as a penalty for understating its exposure to the subprime mortgage market during the financial crisis.

Gary Crittenden, former chief financial officer at Citigroup and Arthur Tildlesly, former head of investor relations, agreed to pay a total of $180,000 to settle related claims without denying or admitting to the allegations.

By Jim Ottewill

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