Citi Settlement Eyed by SEC Watchdog

NEW YORK ( TheStreet) - The Securities and Exchange Commission's inspector general is looking into allegations that the agency gave preferential treatment to Citigroup ( C) executives when forging a $75 million settlement last year.

The bank agreed to pay the fee to resolve SEC claims that Citi had improperly stated investments linked to subprime mortgages years ago. Former CFO Gary Crittenden and a former head of investor relations, Arthur Tildesley, also paid $100,000 and $80,000, respectively, to resolve the SEC's claims without admitting to or denying any wrongdoing, according to public documents. At the time, U.S. District Judge Ellen Huvelle questioned why the SEC hadn't pursued executives more aggressively, but ultimately approved the deal.

The SEC's top enforcement official, Robert Khuzami, asked staffers to change language regarding accusations against the two executives when launching allegations against them. His request came after consulting with Citi lawyers, according to a letter from an unnamed whistleblower that was obtained by Sen. Charles Grassley (R., Iowa).

Sen. Grassley then alerted SEC Inspector General David Kotz to the issue by forwarding the letter raising the allegations. Kotz then opened a probe into whether the SEC acted improperly.

"The settlement appropriately held the company and individuals accountable," SEC spokesman John Nester said in response to questions from TheStreet. "It was the product of a thorough investigation and a careful evaluation of the evidence and the applicable law. We stand ready to assist and cooperate fully with the IG's review."

A call to the inspector general's office was was not immediately returned. A Citi spokesman declined to comment. The news was first reported by Bloomberg.

-- Written by Lauren Tara LaCapra in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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