The bigger Ponzi scheme that the media is ignoring involves Robert Rubin
December 16, 2008
Summarized: Lawsuit: Citigroup scheme hid debt obligations
Citigroup Inc., the second-biggest U.S. bank by assets, was accused by investors of repackaging unmarketable collateralized debt obligations and reselling them to itself to hide its exposure to the securities…
Citigroup began using the “CDO-related quasi-Ponzi scheme” in 2006 to give the appearance that it had a healthy asset base, investors allege in court documents.
This and other claims are made in a 498-page amended complaint on Monday in an investor class action, or group lawsuit, originally filed in November 2007 in Manhattan federal court. The new complaint, which is based on an investigation by investor lawyers at Kirby McInerney LLP in New York, seeks unspecified damages based on the bank’s loss of more than $100 billion in market capitalization.
…Citigroup, based in New York, last month got $306 billion of U.S. government guarantees for troubled mortgages and toxic assets to stabilize the bank.
…”Citigroup during the class period underwrote in excess of $70 billion of such instruments, but, unbeknownst to the market, had retained approximately $57 billion of the very CDO securities it underwrote,” according to the complaint.
…When CDO indexes showed steep declines in the value of the securities, Citigroup didn’t adjust its valuations, relying instead on better rating company evaluations or sales to itself, according to the complaint.
“Citigroup also misrepresented and concealed its exposure to SIVs,” or structured-investment vehicles, the investors say, referring to the funds as “ticking time bombs that eventually exploded back onto Citigroups balance sheet.”
In addition to Citigroup, the complaint names as defendants former Chief Executive Officer Charles Prince, Vice Chairman Lewis Kaden, former Chief Financial Officer Sallie Krawcheck, CFO Gary Crittenden, director Robert Rubin, and other senior executives.
…The complaint says the executives collectively sold almost 3 million shares, worth $150 million, at the same time the bank was concealing its exposure to mortgage-related securities.