None of the settlements are for intentional fraud – a key point – but for “unintentional fraud.”
His settlement makes Crittenden the highest-ranking executive yet to be held (at least somewhat) accountable for not disclosing the full amount his company was at risk because of subprime exposure, but his $100,000 settlement is a pittance – the former CFO took home $20 million from Citi in 2007.
He then took home another $12 million worth of stock in 2008 even though the bank nearly collapsed. Citigroup’s stock in total fell around 95 per cent during Mr. Crittenden’s time at the bank.
(To be fair to Citi, the pay packages were part of contractual obligations.)
Then, Crittenden left the company in 2009 after spending just 5 months as CFO to “spend more time with his family,” according to the Wall Street Journal. But – then he went to join his former (Bain) colleagues Huntsman Gay Global Capital, a PE (private equity) firm.
It’s a little hard not to get steamed reading about this.
A reminder of what happened at Citi during the crisis:
- In the first quarter of 2007, Citi officials (including Crittenden) knew that the bank had $37.8 billion of liquidity puts and CDOs in subprime assets
- By the third quarter, liquidity puts and CDOs exposure had risen to $39 billion and the bank was required to take on $25 billion of CDO-backed debt
- Citi pre-announced 3Q earnings on Oct. 1 2007 and reported only that the bank’s subprime holdings in “secured lending” were $13 billion in June 2007
- Someone flagged the discrepancy between $13 billion reported existing and $43 billion in actually existing subprime exposure
- An unnamed investor-relations official—believing the investment bank had requested that the exposure not be disclosed—replied there was “no choice” but to stick to the $13 billion figure
- Citi said the $13 billion had “declined slightly,” and subprime losses were $1 billion, but didn’t disclose the CDO holdings which had risen to $43 billion
- Citi eventually lost more than $30 billion on the assets
In the end, his paying only $100,000 is a catch-22. It’s so low that it looks like the SEC didn’t have much on him, but it also make him look bad because it’s obviously nothing to him, having made so much in the past. Had he paid more to settle with the SEC, his would still be the first face to get a tomato thrown publicly at him for screwing things up during the financial crisis. But he’d look like less of an arsehole and might even be applauded for taking accountability for obvious mistakes that happened at a big bank during the financial crisis.
Then again – he’d also have to admit that he did something wrong. Now he remains one of many execs who, we all can probably agree messed up in an already massively messed up system and *kind of* deserve to be held accountable, but also can’t really be blamed, technically.
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