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SEC: Former Citi's Execs Knew of Subprime Losses

Charles Prince and Robert Rubin allegedly knew of the bank's multiplying losses, the SEC says.



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former chief executive Charles 'Chuck' Prince, as well as former senior advisor Robert Rubin, allegedly knew of the bank's multiplying losses despite protestations that they were unaware prior to the crisis that nearly crippled the institution, according to a

Securities and Exchange Commission

court filing.

Prince and Rubin, who was temporary chairman at Citigroup in late 2007, apparently knew that even the highest-rated segments of Citi's subprime-related securities were the source of about $200 million in new losses in October 2007, according to

Bloomberg News

, which cited a SEC filing on Wednesday. Those losses eventually lead to the financial titan toreceiveing $45 billion in government bailout funds.

Citigroup in July agreed to pay a

regulatory penalty of $75 million

to settle SEC allegations that it misled investors regarding the extent of its exposure to subprime mortgages in 2007. The SEC alleged that: "Between July and mid-October 2007, Citigroup represented that subprime exposure in its investment banking unit was $13 billion or less, when in fact it was more than $50 billion.

The SEC also fined two former executives -- Gary Crittenden, its chief financial officer at the time and Arthur Tildesley, Jr., who served as head of investor relations at the time and is now the head of cross marketing at the company. Crittenden was fined $100,000, and Tildesley was fined $80,000.

According to


, a U.S. District judge asked the SEC last month to identify which senior executives knew of the problems before Citigroup's settlement with the SEC is approved. Citigroup's former chief risk officer David Bushnell and its general counsel Michael Helfer also knew of the losses, according to the article.

With the SEC noting more executives were aware of the issues, the article suggests that more could be held accountable.


cites the filing as saying that Crittenden and Tildesley were "more closely" tied to the lack of disclosures.

Prince and Rubin were grilled by the Financial Crisis Inquiry Commission in April

regarding the role Citigroup played during the financial crisis.

During the testimony, while Prince was apologetic, while Rubin chose to focus on his view of the crisis as being the product of "an extraordinary combination of factors" rather than the result of any single cause.

Rubin also said in his remarks that he did not recall "knowing before September 2007 that these super senior tranches had been retained."

Prince resigned from Citigroup in November 2007, after 30 years of working for the financial conglomerate. The company ended up taking some $30 billion in writedowns over the course of six quarters as a result of devalued collateralized debt obligations, specifically super senior tranches, according to Prince's April remarks. The company eventually accepted a total of $45 billion in federal bailout funds and the Treasury still owns slightly less than a one-fifth stake in Citi.

As a testament of Citigroup's woes, shares have hovered in the $4 range for much of this year, even as it remains the most actively traded stock on the

New York Stock Exchange

. While the stock is up 16% this year, shares have not closed at or over $4 since Aug. 10. The stock was most recently trading up 2.2% to $3.92 with 140 million shares that changed hands.

--Written by Laurie Kulikowski in New York.

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Laurie Kulikowski


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