The evil empire strikes again! Citigroup/Smith Barney once again out does themselves with their immoral creativity and ingenuity. Their ability to steal and defraud without conscience is chilling. Citigroup/Smith Barney has been ordered to pony up $208 million to settle Securities and Exchange Commission fraud charges that two of its subsidiaries profited on transfer-agency discounts at the expense of individual investors. Citigroup/Smith Barney profited from discounts they received through a transfer agent for over five years. By law, they are supposed to pass those discounts on to their clients. Instead these Dark Sith Lords of White Collar Crime mislead, lied and covered up when recommending the transfer agent to mutual fund boards of directors.
In a disgusting cloak and dagger type move Citigroup/Smith Barney recommended to mutual funds to use its sham affiliate to replace First Data Investors Services Group who was the third party firm that had acted as a transfer agent for its mutual funds. What Citigroup/Smith Barney neglected to inform mutual fund directors, was that First Data had agreed to discount its fees by up to 60% over five years and continue to do the work under a subcontracting deal with a Citigroup affiliate known as Citigroup Trust Bank. The discounts, instead of being passed on to mutual fund shareholders were pocketed by Citigroup.
SEC enforcement division director Linda Thomsen stated that “Fund advisors cannot place their own interests above the funds’ interests, and must come clean about compensation and benefits they receive and any conflicts of interest they might have.” Mark Schonfeld head of the SEC’s northeast regional office stated that “Citigroup’s hefty penalty should send a strong message to others that this type of conduct will not be tolerated.”
The pontificating of SEC officials and other misguided regulators is always a source of amusement for me. Do they honestly think that Wall Street takes them seriously? Citigroup/Smith Barney engaged in another case of well-thought out premeditated fraud. Dealing with criminals of this magnitude with fines and lectures is laughable. In other news Citigroup/Smith Barney is raising capital to fund a Death Star, details are sketchy.