"Wristslap" can be defined that the shareholders and/or customers will pay the fine in less equity value or higher fees. With co-conspirators like the CFTC and Federal Reserve, what's to fear?

And so Citi becomes the third firm after Goldman and JPM to put all their gross CDO criminal (wait, allegedly, they neither admitted nor denied) activity behind them with a $285 million wristslap.


Any of these have executives that are Too Big to Jail

Citigroup will pay USD 285mln to settle SEC charges for misleading investors about selling CDOs related to housing market, according to SEC

Citigroup's main US broker-dealer unit misled investors about USD 1bln CDO tied to US housing market, in which Citigroup bet against investors.
Citigroup bet against investors as housing market showed signs of distress, SEC said
CDO defaulted, Citigroup made $160m in fees/trading profits
$285m will be returned to investors, SEC says in statement
SEC also faults Citigroup employee Brian Stoker and Credit Suisse portfolio manager Samir H. Bhatt

As Bloomberg reminds us, "Goldman Sachs Group Inc. agreed to pay $550 million to resolve claims it failed to tell investors in a mortgage-linked product that a hedge fund betting against the CDO helped select the underlying assets. JPMorgan Chase & Co. agreed to pay $153.6 million to resolve similar claims related to its sale of a CDO in 2007."

We leave it up to readers to calculate how much in bonuses was paid at GS, JPM and Citi over the past 4 years.

It is unclear if the Citi fine used will be courtesy of FDIC-backed TLGP notes still on Citi's books. Either way, justice is now "served."

Full release from the SEC:
Washington, D.C., Oct. 19, 2011 – The Securities and Exchange Commission today charged Citigroup’s principal U.S. broker-dealer subsidiary with misleading investors about a $1 billion collateralized debt obligation (CDO) tied to the U.S. housing market in which Citigroup bet against investors as the housing market showed signs of distress. The CDO defaulted within months, leaving investors with losses while Citigroup made $160 million in fees and trading profits.

The SEC alleges that Citigroup Global Markets structured and marketed a CDO called Class V Funding III and exercised significant influence over the selection of $500 million of the assets included in the CDO portfolio. Citigroup then took a proprietary short position against those mortgage-related assets from which it would profit if the assets declined in value. Citigroup did not disclose to investors its role in the asset selection process or that it took a short position against the assets it helped select.

Citigroup has agreed to settle the SEC’s charges by paying a total of $285 million, which will be returned to investors.

The SEC also charged Brian Stoker, the Citigroup employee primarily responsible for structuring the CDO transaction. The agency brought separate settled charges against Credit Suisse’s asset management unit, which served as the collateral manager for the CDO transaction, as well as the Credit Suisse portfolio manager primarily responsible for the transaction, Samir H. Bhatt.

“The securities laws demand that investors receive more care and candor than Citigroup provided to these CDO investors,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Investors were not informed that Citgroup had decided to bet against them and had helped choose the assets that would determine who won or lost.”

Kenneth R. Lench, Chief of the Structured and New Products Unit in the SEC Division of Enforcement, added, “As the collateral manager, Credit Suisse also was responsible for the disclosure failures and breached its fiduciary duty to investors when it allowed Citigroup to significantly influence the portfolio selection process.”... read more>>