Citigroup faces charges by Cuomo, SEC probe
Sunday, 3 August 2008
NEW YORK, Aug 2 (AP): New York Attorney General Andrew Cuomo Friday said he is prepared to charge Citigroup Inc. with fraudulent sales of auction-rate securities and with the destruction of key documents.
Cuomo joins the Securities and Exchange Commission and other regulators in examining Citigroup's sale of auction-rate securities. They believe the instruments were being aggressively marketed despite a rapid weakening in trading.
Auction-rate securities have their interest rates set at periodic auctions, depending on the submitted bids. The investments were once considered safe, but the market collapsed in February amid turmoil in the credit markets.
Citigroup is the latest bank to disclose regulators are seeking information on its sales of auction-rate securities. In May, Wachovia Corporation disclosed it too has received requests from the SEC about auction-rate securities sales.
New York sued UBS AG on July 24 over the same matter, and states like Massachusetts and Texas have filed similar complaints. All of them accuse the Swiss bank of fraudulently promoting tens of billions of dollars of auction-rate securities as safe when it knew a crisis was brewing.
In a letter to Citigroup's counsel, Cuomo said that the bank destroyed documents and tapes that were under subpoena during a five-month investigation by his office. He said the bank "initially failed to notify the New York Attorney General's Office about the destruction of the tapes even though Citigroup learned in mid-June that recordings of its auction rate desk had been destroyed."
Cuomo joins the Securities and Exchange Commission and other regulators in examining Citigroup's sale of auction-rate securities. They believe the instruments were being aggressively marketed despite a rapid weakening in trading.
Auction-rate securities have their interest rates set at periodic auctions, depending on the submitted bids. The investments were once considered safe, but the market collapsed in February amid turmoil in the credit markets.
Citigroup is the latest bank to disclose regulators are seeking information on its sales of auction-rate securities. In May, Wachovia Corporation disclosed it too has received requests from the SEC about auction-rate securities sales.
New York sued UBS AG on July 24 over the same matter, and states like Massachusetts and Texas have filed similar complaints. All of them accuse the Swiss bank of fraudulently promoting tens of billions of dollars of auction-rate securities as safe when it knew a crisis was brewing.
In a letter to Citigroup's counsel, Cuomo said that the bank destroyed documents and tapes that were under subpoena during a five-month investigation by his office. He said the bank "initially failed to notify the New York Attorney General's Office about the destruction of the tapes even though Citigroup learned in mid-June that recordings of its auction rate desk had been destroyed."