Ponzi Scheme at Citi

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castlewp's picture
castlewp
Status: Gold Member (Offline)
Joined: Oct 7 2008
Posts: 304
Ponzi Scheme at Citi

New York Post:

A new Citigroup scandal is engulfing Robert Rubin and his former disciple Chuck Prince for their roles in an alleged Ponzi-style scheme that's now choking world banking.

Director Rubin and ousted CEO Prince - and their lieutenants over the past five years - are named in a federal lawsuit for an alleged complex cover-up of toxic securities that spread across the globe, wiping out trillions of dollars in their destructive paths.

Investor-plaintiffs in the suit accuse Citi management of overseeing the repackaging of unmarketable collateralized debt obligations (CDOs) that no one wanted - and then reselling them to Citi and hiding the poisonous exposure off the books in shell entities.

The lawsuit said that when the bottom fell out of the shaky assets in the past year, Citi's stock collapsed, wiping out more than $122 billion of shareholder value.

However, Rubin and other top insiders were able to keep Citi shares afloat until they could cash out more than $150 million for themselves in "suspicious" stock sales "calculated to maximize the personal benefits from undisclosed inside information," the lawsuit said.

The latest troubles for Rubin, Prince and others emerged in a 500-page investigation by Citigroup investors represented by law firm Kirby McInerney.

The probe was used to amend and add new details to a blanket investor lawsuit filed against Citigroup a year ago. The amended suit called the actions of Citi leaders "a quasi-Ponzi scheme" to hide troubles - and keep Citi stock afloat while insiders unloaded about 3 million shares between Jan. 1, 2004 and Feb. 22, 2008 for huge profits.

In addition to Citigroup, Rubin and Prince, the complaint names Vice Chairman Lewis Kaden, ex-CFO Sallie Krawcheck and her successor CFO Gary Crittenden.

Rubin cleared $30.6 million on his stock sales, while Prince got $26.5 million, former COO Robert Druskin got nearly $32 million and former Global Wealth Management unit chief Todd Thomson got $25.7 million, the suit said.

Citi denied the allegations and said it "will defend against it vigorously."

DrKrbyLuv's picture
DrKrbyLuv
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 1995
Re: Prosecute Under The RICO ACT

The government needs to investigate these alleged crimes as a top priority. If sufficient evidence is found the perpetrators should be prosecuted in earnest. Let's face it we have a huge problem with fraud and corruption that continues to shake the peoples confidence. Many are beginning to wonder if our our government itself is not complicit in allowing these things to occur and that loss of confidence just cannot be tolerated.

RICO (Racketeer Influenced and Corrupt Organizations Act) is a "United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization."

Under RICO, a person who is a member of an enterprise that has
committed any two of 35 crimes—27 federal crimes and 8 state
crimes—within a 10-year period can be charged with racketeering.
Those found guilty of racketeering can be fined up to $25,000 and/or
sentenced to 20 years in prison per racketeering count. In addition,
the racketeer must forfeit all ill-gotten gains and interest in any
business gained through a pattern of "racketeering activity." RICO also
permits a private individual harmed by the actions of such an
enterprise to file a civil suit; if successful, the individual can
collect treble damages.

When the U.S. Attorney decides to indict someone under RICO, he or she has the option of seeking a pre-trial restraining order
or injunction to temporarily seize a defendant's assets and prevent the
transfer of potentially forfeitable property, as well as require the
defendant to put up a performance bond. This provision was placed in
the law because the owners of Mafia-related shell corporations often
absconded with the assets. An injunction and/or performance bond
ensures that there is something to seize in the event of a guilty
verdict.

<b>In many cases, the threat of a RICO indictment can force defendants
to plead guilty to lesser charges, in part because the seizure of
assets would make it difficult to pay a defense attorney.</b> Despite its
harsh provisions, a RICO-related charge is considered easy to prove in
court, as it focuses on patterns of behavior as opposed to criminal
acts.

There is also a provision for private parties to sue. A "person
damaged in his business or property" can sue one or more "racketeers."
The plaintiff must prove the existence of a "criminal enterprise." The
defendant(s) are not the enterprise; in other words, the defendant(s)
and the enterprise are not one and the same. There must be one of four
specified relationships between the defendant(s) and the enterprise. A
civil RICO action, like many lawsuits based on federal law, can be
filed in state or federal court. Both the federal and civil components allow for the recovery of treble damages (damages in triple the amount of actual/compensatory damages).]

GDon's picture
GDon
Status: Bronze Member (Offline)
Joined: Apr 2 2008
Posts: 86
Re: Ponzi Scheme at Citi

DrKrbyLuv -

Excellent point.

The proper use, of both sides from the sword of justice, is exactly the type of prescription for real change which we need - and hard to think of a better application, than against those in abuse of power - in Citi or beyond.

Oh sweet irony...

MarkM's picture
MarkM
Status: Platinum Member (Offline)
Joined: Jul 22 2008
Posts: 837
Re: Ponzi Scheme at Citi

I can't help but recall all the time, money and energy spent investigating "steroids in baseball".  Congress was "saving America's pastime".  When there is a serious problem, worthy of complete focus and investigation...nothing.

Who was one of the biggest parasites on this time waster - Joe Biden.  Let's see how Biden responds in a situation where the parties worthy of prosecution have a firm grasp on his privates.

castlewp's picture
castlewp
Status: Gold Member (Offline)
Joined: Oct 7 2008
Posts: 304
Re: Ponzi Scheme at Citi

Rubin's alleged Ponzi scheme dwarf's Madoff's, so why isn't this story getting more coverage?

joe2baba's picture
joe2baba
Status: Martenson Brigade Member (Offline)
Joined: Jun 17 2008
Posts: 807
Re: Ponzi Scheme at Citi

i agree that the perps should get what is coming to them in our humble opinions, however i am a realist. IT AINT GONNA HAPPEN. rubin was a top advisor to obama. he was secretary of treas under clinton (no pun intended).

he probabaly knows where more skeletons are hangin than he has himself. should he find himself in the very unlikely position of facing criminal charges. they will be from the justice dept of obama. should by some miracle he get convicted obama will pardon him, ala scooter, saying he has suffered enough. should this civil suit proceed it will be decided by who has the most on the judge or who can come up with the most money for the judge's retirement fund.

call me a cynic but take a look at the roster of federal prisoners. there aint too many former secs of treasury doing time they are too big to go to jail.

steal a loaf of bread though and you will do time. the only justice aristocrats have ever gotten has been at the wrong end of a guillotine.

but you know maybe i am wrong maybe this time it will be different.

from the movie eddie and the cruisers

" guys like us wordman they discover oil under our gardens all we get is dead tomatoes "

sal to wordman

merry christmas

joe

Headless's picture
Headless
Status: Gold Member (Offline)
Joined: Oct 28 2008
Posts: 363
Re: Ponzi Scheme at Citi

DrKrbyLuv said:

"The government needs to investigate these alleged crimes as a top priority. If sufficient evidence is found the perpetrators should be prosecuted in earnest. Let's face it we have a huge problem with fraud and corruption that continues to shake the peoples confidence. Many are beginning to wonder if our our government itself is not complicit in allowing these things to occur and that loss of confidence just cannot be tolerated."

Karl Denninger echoed:

"...an increasing number of people no longer have any belief that the government exists to prosecute crimes and convict crooks.

In fact, there is a rapidly-growing belief among the population that the government and its agents have turned into the felons.

There is an uneasy "chatter" in this general vein showing up, widely dispersed among the population, but I hear it both in online and offline conversations almost as a "backhanded" comment now - much like occurred when Nixon was caught doctoring the Watergate tapes.

The difference is that this time the people know their wallets are being robbed instead of a political party's documents ensconced in a file cabinet.

This had better not spread into a widely and strongly-held opinion, and there is in fact only one way for the government to stop that from occurring.

We must see indictments of the bankers and government insiders who were involved in creating this mess.

It needs to start happening right now

TODAY."

http://market-ticker.denninger.net/archives/697-To-Our-Government-You-Must-Act-Now.html

 

joe2baba said:

" IT AINT GONNA HAPPEN...but you know maybe i am wrong maybe this time it will be different."

 

And I, NZO, think: Yes, joe2baba, it, indeed, might be "different this time" due to comments like the one that inspired Karl Denninger to call for indictments:

Karl says:

"Then last evening a topic was posted on my forum linking to one Hal Turner's blog, in which he said (this is not my speech - it is on the linked site - and yeah - its shocking):

'WARNING TO BANKING EXECUTIVES: If you do not return the bonuses, stock options and country club memberships bought with taxpayer bailout money, YOUR NAME AND ADDRESS will be made public in a manner designed to "incite" a reaction by the public. (Special emphasis on the word "incite!)

You have until Friday, December 26, 2008 to return the money. There will be no negotiating, no obeying of court orders of protection, no way to prevent being dealt with harshly.

I don't care about your employment contracts, I don't care about your civil rights and I sure as **** don't care about the law or the courts.

You guys have ****ed this country for the last time. It's time for you to be paid back and I intend to see that you receive your payback.'

I don't like this one bit, it is way beyond "polite discourse" (and IMHO quite possibly into a realm that one should not cross) but it is entirely predictable, and unfortunately, is unlikely to be an isolated incident."

Link to the specific comment above:

http://halturnershow.blogspot.com/2008/12/16-billion-of-bank-bailout-money-went.html

I think we're shifting a large and growing percentage of the population toward the vigilante end of the spectrum each and every day that job losses increase and bonuses don't decrease--at least! (Bonuses? How about quick deaths...in lieu of what should happen?) I can't imagine this sacking of America ending without a few heads being lopped off of some pretty prominent people. People with guns don't get mad when you fuc* their parents and grandparents out of their life's work by stealing their retirement funds. People with guns get even.

Then consider how people (with guns) feel about what's happening (and going to happen) to their children--the children they can no longer afford to send to college. And the father who can no longer afford to feed his children? I want to be the Henry Paulson that runs into that guy past dark...

It's like Gerald Celente said (liberal paraphrase, but you can see it on YouTube): These silverspoons on Wall Street don't get it. They have no idea what's going to happen. They don't understand that people who have lost everything have nothing to lose--don't understand what they are going to do."

I think it will be different this time...

P.S. I don't have a gun, and I won't be in the U.S. when those who do start loading them--I hope!

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