Felix Salmon

Fine Rubin!

By Felix Salmon
September 9, 2010

On October 15, 2007, Citigroup CFO Gary Crittenden lied to investors and analysts listening to the bank’s quarterly earnings call. He said that Citi’s subprime exposure had fallen to $13 billion — but that wasn’t true. In fact, it was more like $53 billion, once various super-senior tranches and liquidity puts were included. He knew all about those risks, he didn’t mention them, and as a result he has agreed to pay a $100,000 fine.

Now, the SEC has admitted that Bob Rubin knew about the risks too — along with Chuck Prince, Bob Druskin, and others. Rubin was chairman at the time: it was ultimately his job to oversee the management of the company and to ensure that shareholders were fully apprised of the risks on Citi’s balance sheet. But instead of pushing for transparency towards shareholders, he stood quietly by while Crittenden lied to them, and said nothing.

The SEC wants to settle with Citigroup — which is to say, impose pain on its current shareholders, many of whom are the victims here — without fining Rubin at all. That’s silly. I hope that Judge Ellen Huvelle pushes for some kind of formal punishment of Rubin. It couldn’t happen to a more deserving man.

5 comments so far | RSS Comments RSS

Felix, you call many of Citi’s current shareholders “victims”, but it is the shareholders who basically rubberstamp the board of directors. I realize that few people in this country want accountability for their actions, but just like voters who elect politician that serve themselves, shareholders elect directors whose own self-interest usually trumps that of the company they are allegedly directing. The shareholders are not victims of guys like Rubin, but rather accessories, or at least un-indicted co-conspirators.

Posted by OnTheTimes | Report as abusive

The current shareholders aren’t victims. They should know by now that Citi is basically insolvent and is only being kept alive by “extend and pretend.”

Posted by EveryManAKing | Report as abusive

“There has been nothing here that is being done to assure anyone that senior management who’s responsible, whatever level of culpability you’re talking about, is going to have any pain here,” Huvelle told the SEC at an Aug. 16 hearing on the proposed settlement.

The judge is right… make the culpable pay… it really is about time some heads rolled rather then just administer the collective hand slaps.

Posted by hsvkitty | Report as abusive

If you’re going to be a member of the club, you want to be a level or two higher than these guys, who, though they get for the most part slaps on the wrist, they still end their lives ignominiously and often much less wealthy. You want to be a Jimmy Johnson or a Petros Peterson. What’s the password?

Posted by Uncle_Billy | Report as abusive

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