Just when you think you could not become more cynical, Citigroup comes along and throws an award ceremony honoring employees who concealed evidence of mortgage fraud from the Federal Housing Administration (FHA). To make matters worse, the ceremony occurred in January 2011, long after “too-big-to-fail” Citigroup received $45 billion in taxpayer bailout money (the most of any financial institution).
It only came to light recently after CitiMortgage agreed to pay $158.3 million to settle mortgage fraud charges filed by the U.S. Department of Justice. As part of its settlement, Citi, which was not released from possible criminal liability, admitted that the allegations against it were true. Among the allegations that Citi admitted is that certain of its employees applied “brute force” to intimidate and humiliate its quality control managers to eliminate or downplay evidence of mortgage fraud they had uncovered, and that Citi “erased ? without any self-reporting ? the nearly 1,000 fraudulent loan referrals it had accumulated but never investigated.” Such intimidation was documented in internal Citi emails
Adding insult to injury, Citi held a quarterly “Star Players Award” ceremony honoring the star employees who browbeat the QC managers, who were legally required to report declining loan quality and fraud to the FHA. Citi’s conduct was “nothing short of abuse and bordering on fraudulent actions,” according to a Wall Street Journal article (“Star Players in a Big Citi” by Al Lewis), citing the facts in the lawsuit that Citi admitted.
Citigroup has approved 30,000 loans in the amount of $4.8 billion since 2004; over 30 percent of the borrowers have stopped paying; HUD has paid out almost $200 million in insurance claims on those mortgages ? as Mr. Lewis points out, the tally is still growing as Citi loans continue to default.
The fraud only came to light when a whistleblower (one of the QC managers) summoned the bravery to resist the dishonesty and intimidation and take a stand.
As Mr. Lewis concludes: “Big Citi parties on. I just wish it would invite a few of us taxpayers. We’re the ones paying for it.”
Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.