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Citigroup Predatory Lending & EPA Cleanup

http://www.innercitypress.org/citi.html

The Citigroup Watch

Citigroup, formed by the 1998 merger of Travelers and Citicorp, is the largest U.S.-based bank holding company. It engages in questionable high interest rate lending in low income communities across the United States, and now globally, through its CitiFinancial unit. Though its investment bank, Citigroup underwrites and trades in pools of loans issued by other predatory lenders. It has assisted Enron, WorldCom, and others; it has settled a slew of securities charges on the cheap. Citigroup finances and is involved in such environmentally destructive projects, including as a purchaser, despite contrary claims and its surreal inaccurate advertisements. Citigroup is nearly the definition of "predator;" this is the Citigroup Watch.

Inner City Press / Community on the Move's (ICP's) initial focus on Citibank was on its branch closings, and disparate mortgage lending. ICP filed an extensive opposition to the Citicorp - Travelers merger application (click "http://www.innercitypress.org/samprot.html" to view). ICP continued to watchdog and document Citigroup's record, in connection with "http://www.innercitypress.org/citiafcc.html", "http://www.innercitypress.org/citieab.html", "http://www.innercitypress.org/citimex.html", "http://www.innercitypress.org/citical.html".and the "http://www.innercitypress.org/citifile.html" card porfolio. "http://www.innercitypress.org/citi2001.html" for ICP's "http://www.innercitypress.org/citi2001.html" ICP has published a "http://www.innercitypress.org/books.html" about the Citi-relevant topics of predatory lending, and corporate fraud - click "http://www.innercitypress.org/books.html" for sample chapters, "http://" for a "http://www.innercitypress.org/usamap.html", "http://www.atlasbooks.com/marktplc/01049.htm" for fast "http://www.atlasbooks.com/marktplc/01049.htm", and "http://www.innercitypress.org/books.html" for other "http://www.innercitypress.org/books.html". The "http://www.innercitypress.org/predwash31504.html", calls Predatory Bender: America in the Aughts "the first novel about predatory lending;" the "http://www.innercitypress.org/predlond41504.html", "A Novel Approach," said it "has a cast of colorful characters," including one Vyle. The "http://www.pittsburghcitypaper.ws/archive.cfm?type=Book Review&action=getComplete&ref=1199" says the 100-page afterword makes the "indispensable point that predatory lending is now being aggressively exported to the rest of the globe." Click "http://www.pittsburghcitypaper.ws/archive.cfm?type=Book Review&action=getComplete&ref=1199" for "http://www.pittsburghcitypaper.ws/archive.cfm?type=Book Review&action=getComplete&ref=1199"; click "http://www.innercitypress.org/search.html" to "http://www.innercitypress.org/search.html" See also, ""http://www.citylimits.org/content/articles/articleView.cfm?articlenumber=1173"," by Matt Pacenza, City Limits, Sept.-Oct. 2004. In this space, we are running short weekly updates on Citigroup. For or with more information, "http://www.innercitypress.org/contact.html".

Update of June 6-7, 2005: CitiFinancial on June 6 admitted that it has lost nearly four million consumers’ files -- all customers of CitiFinancial’s branch system. The files lost include Social Security numbers. While the company expressed shock and predicted that no harm will come of it, it’s worth noting (as much of the other press didn’t) that CitiFinancial has had this problem before. For example, in Florida in 2002 -- as reported by the local NBC TV affiliate there,

“Citifinancial even left its files in convenient boxes, making it easy for anyone who wanted to cart them away. NBC2 decided to find out what kinds of records were there. What was found surprised even seasoned investigators: drivers license information, credit reports, social security numbers, even bank account numbers — for more than 1,000 people. ‘This would be a treasure trove of information for an identity thief. People’s names, social security numbers, banking information,’ said David White of the Collier County Sheriff’s Office Economic Crimes Unit. White said there was enough personal information in the company’s trash for an identity thief to bankrupt anyone. He said a thief could easily take over someone’s bank accounts with the data contained in the trashed documents... A spokesperson for Citigroup in New York admits wrongdoing in a written statement. It reads: ‘Keeping customer information secure is a top priority for Citifinancial. In an isolated incident at one of our offices, some files for inactive loan accounts that should have been destroyed according to our normal procedures were disposed of improperly.’” -- click "http://www.nbc-2.com/news/stories/archive/2002/110402-trashed_docs1.shtml" to view

Citigroup’s June 6, 2005, statement included this quote: "’Customer security is of paramount importance to Citigroup,’ said Debby Hopkins, Chief Operations and Technology Officer of Citigroup. ‘While this incident affects the customers of only one of our businesses’” -- a business through which, even before losing the data, Citigroup was harming consumers. And now Citigroup wants to buy more consumers and their data -- all those who have credit cards with Federated Department Stores (which operates Macy's and Bloomingdale's), and May, which Federated is trying to acquire. Developing... For or with more information, "http://www.innercitypress.org/contact.html".

Update of June 6, 2005: The (reverse) redlining of whole regions of the United States by the nation’s large bank, Citigroup, is the subject of an ongoing investigation by Inner City Press / Fair Finance Watch. Here now is a state-by-state presentation, by percentage of loans made in each state that are higher-cost “rate spread” loans, of Citigroup’s lending, compared in all but seven instances (coming soon) to the similar percentage in the state for an aggregate comprised of the three largest mortgage lenders in the country. For this aggregate, the percentage varies from six to twenty four percent. For Citigroup, the spread is from nine percent to a high of 71.61 percent, in Mississippi. In West Virginia, ninety-one percent of Citigroup’s loans to African Americans were higher-cost rate spread loans. But the disparate pattern goes beyond race. Here’s above-described presentation, by state abbreviation, then percentage of Citigroup’s loans in the state in 2004 that were higher cost, rate spread loans, then the percentage for the aggregate, for all but seven states:

MS - Citi: 71.61% / Agg.: 24.72%; AL - Citi: 65.50% / Agg.: 18.13%; TN - Citi: 65.0% / Agg.: 14.25%; WV - Citi: 61.13% / Agg.: 20.76%; ID - Citi: 50.58% / Agg.: 8.81%; KY - Citi: 50.18%; OK - Citi: 49.35% / Agg.: 20.75%; LA - Citi: 48.54%; SC - Citi: 47.02% / Agg.: 14.29%; VT - Citi: 45.56%; ND - Citi: 45.41% / Agg.: 13.18%; NC - Citi: 45.20% / Agg.: 10.26%; OH - Citi: 44.35% / Agg.: 11.1%; PR - Citi: 41.56%; TX - Citi: 41.09% / Agg.: 13.60%; WI - Citi: 40.14% / Agg.: 11.28%; NM - Citi: 39.62% / Agg.: 14.27%; IN - Citi: 37.97% / 12.67%; AR - Citi: 36.64%; PA - Citi: 36.42% / Agg.: 9.58%; KS - Citi: 36.23% / Agg.: 11.68%; GA - Citi: 36.09%; MI - Citi: 33.79% / Agg.: 12.09%; HI - Citi: 33.73% / Agg: 5.22%; ME - Citi: 32.06% / Agg.: 9.96%; WY - Citi: 31.56% / Agg.: 13.54%; VA - Citi: 31.21% / Agg.: 8.11%; WA - Citi: 30.49% / Agg: 6.38%; IA - Citi: 29.59% / Agg: 13.08%; MT - Citi: 29.39%; NE - Citi: 29.07% / Agg: 13.83%; DE - Citi: 26.89% / Agg: 7.17%; UT - Citi: 25.63% / Agg: 10.70%; RI - Citi: 24.48% / Agg: 10.41%; AZ - Citi: 23.94%; SD - Citi: 23.44% / Agg: 9.39%; FL - Citi: 23.28% / Agg: 9.29%; MD - Citi: 22.10%; AK - Citi: 21.19% / Agg: 12.19%; NV - Citi: 20.66% / Agg: 8.01%; NH - Citi: 20.66% / Agg: 10.18%; MO - Citi: 20.43% / Agg: 17.94%; OR - Citi: 20.41% / Agg: 7.25%; IL - Citi:18.76% / Agg: 12.67%; MN - Citi: 17.68% / Agg: 6.71%; CO - Citi:16.05% / Agg: 8.13%; CT - Citi: 15.92% / Agg: 9.10%; NJ - Citi: 15.73% / Agg: 7.28%; MA - Citi: 12.06% / Agg: 7.63%; NY - Citi: 11.90% / Agg: 7.26%; CA - Citi: 9.21% / Agg: 6.08%

There is a major problem here, one that ICP is raising, state by state, to attorneys general and beyond. Meanwhile, in Citigroup’s wider business, it’s another week, another settlement. On May 31, Citigroup issued a press release saying that it will disgorge about $128 million and pay $80 million in penalties in the settlement of an SEC probe into arrangements between mutual funds of Citigroup's Smith Barney unit, an affiliated transfer agent and an unaffiliated sub-transfer agent. Citigroup noted that it has neither admitted nor denied wrongdoing. That is: still in denial... Beyond its own disparate and predatory lending, Citigroup Mortgage Loan Trust Inc.'s asset-backed pass-through certificates, series 2005-HE1, which closed on May 10, 2005, included loans from Argent Mortgage Company, LLC, and Olympus Mortgage Company -- both units of Ameriquest, which is under investigation in 25 states. Birds of a feather... For or with more information, "http://www.innercitypress.org/contact.html".

Update of May 31, 2005: In continuing analysis of the 2004 Home Mortgage Disclosure Act data, Inner City Press / Fair Finance Watch has come upon a striking disparity in Citigroup’s credit offerings by state and region. Among ICP’s findings: while 12.06% of Citigroup’s 8797 loans in Massachusetts in 2004 were are or over the rate spread, fully 71.61% of Citigroup’s 1909 loans in Mississippi were rate spread / higher cost. In Tennessee, 65.50% of Citigroup’s 5548 loans were rate spread / higher cost. Other impacted states, (reverse) redlined by Citigroup, include Alabama, West Virginia, Kentucky, Oklahoma, Louisiana, South Carolina, North Carolina, Ohio, Georgia, Michigan, Iowa, Texas, etc.. ICP has filed complaints with the attorneys general in these states and others. [For more, see numbers in Report of June 6, 2005, above.]

Update of May 23, 2005: ICP on May 20 submitted to the Florida Attorney General’s office an analysis of and demand for action on the glaring disparities in Citigroup’s 2004 mortgage lending in Florida:

Citigroup -- Whites: 35,194 applications, leading to 9438 denials (26.81% denied) and 17,786 originations; 3557 [or 20.0%] exceeded rate spread.
African Americans: 8061 applications, leading to 3338 denials (41.41% denied, 1.54 times higher than whites) and 2831 originations; 1410 [or 49.81 percent] exceeded rate spread [2.49 times higher / more likely to be over rate spread than whites].

Latinos: 8484 applications, leading to 2784 denials (32.81% denied, 1.22 times higher than whites) and 3574 originations; 708 [or 19.81 percent] exceeded rate spread [0.99 times “higher” / more likely to be over rate spread than whites].

On May 17, two days before issuing a misleading press release about dropping arbitration on real estate loans, Citigroup added an “"http://www.citi.com/citigroup/citizen/consumerfinance/050517a.htm"” to its corporate citizenship web site, on the matter of the HOEPA loans in its 2004 mortgage data. The editor’s note states:

“It is CitiFinancial’s policy not to originate loans covered by the Home Ownership and Equity Protection Act (HOEPA)... Yet some confusion has arisen because we implemented this policy over time. Our CitiFinancial branch network in the U.S. adopted the policy in January 2003, Citicorp Trust Bank adopted it in April 2004, and Associates Financial Services of Puerto Rico did so in July 2004. If we purchase a lender that makes HOEPA loans – as we did in 2004 with Washington Mutual Finance Corp. – as soon as we integrate the business it no longer makes them. And in the event that a HOEPA loan is inadvertently made, it is our policy to work with the borrower to lower the interest rate.”

First, we note that the “confusion,” if any exists, starts with Citigroup chief operating officer Robert Willumstad, who on April 19 from the stage at Carnegie Hall directly denied that there were any HOEPA loans reported in Citigroup’s 2004 HMDA data. That statement was false and has yet to be retracted.

Second, even the statement itself shows the gaping loopholes to Citigroup’s supposed commitment. Citigroup acquired Associates in late 2000 -- but “Associated Financial Services” continued making HOEPA loans until at least July 2004. According to Citigroup, it can take more than three and a half years to “integrate” an acquired business. Given the number of acquisitions it makes (at least up until the Federal Reserve’s March 2004 “acquire-no-more” order), Citigroup always has an acquired-but-not-integrated business through which to violate its commitments.

Given the duplicity of Citigroup’s handling of this whole matter, for example beyond Mr. Willumstad’s uncorrected misstatement having found the HOEPA loans and trying to cover them up, including by filing a separate 2004 Loan Application Register for Washington Mutual Finance Group, the acquisition of which Citigroup consummated on the ninth day of the year, and now the quiet footnote two days before making another supposed commitment, one presumes that Citigroup uses similar loopholes to its other commitments, on money laundering, five point ethics, etc.. Again the suggestion: less schmoozing, focus on improving. Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of May 19, 2005: Earlier today, Citigroup issued a "http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20050519005481&newsLang=en" making much of its commitment to end mandatory arbitration on its real estate loans by August 2005. Given that only two weeks ago, Citigroup finally admitted that it continued making super high cost HOEPA loans for at least a year and a half after it claimed to have stopped, there is reason to be dubious of this "new commitment." If Citigroup violated its previous commitment, how is this one different? There is a way: CitiFinancial legal officials have told consumer advocates that the arbitration announcement is little more than free publicity, given the new federal class action legislation and arbitrators' increasing willingness to hear disputes on a quasi-class action basis. Also, many binding mandatory arbitration clauses, including CitiFinancial's, have been found unconscionable and unenforceable by the courts. So -- free publicity. Somewhat shameless, though. The release says that says that Citigroup "Implemented a policy to not originate HOEPA loans in CitiFinancial, beginning with the branch network." As explained below, Citigroup claimed to have stopped HOEPA loans in January 2003, but reported 837 HOEPA loans in its 2004 HMDA data. These include loans made in 2004 by the branch network. See, e.g., New York Times of May 4, 2005, and the Reports below, back to April 19, 2005. Also unaddressed: Citigroup's glaring disparities in its subprime lending, see for example "http://www.innercitypress.org/2004hmda4.html", of the New York City MSA (where Citigroup confines African Americans to high cost / rate spread loans seven times more frequently than whites, much worse that its peers). Shameless...

Update of May 16, 2005: This week we step back, temporarily, from drilling ever-deeper into the 2004 Home Mortgage Disclosure Act data. In another part of Citigroup’s subprime scheme, the company announced on May 10 the combination of its auto finance subsidiaries Arcadia Financial LTD, Auto One Acceptance Corp. and TransSouth Financial Corp. -- the last of these was acquired along with Associates First Capital Corp. in 2000. Since ICP’s inquiring into Citigroup’s 2004 HOEPA loans found that Citigroup has kept Associated-branded subsidiaries, to work around supposed “best practices” it has announced, one wonders what other Associates subsidiaries are out there in the netherworld of the Citigroup universe. In any event, the subprime car lending will now operate as CitiFinancial Auto.

And now a sample from the mailbag, which has been on hold during all this data:

Subj: Citigroup Watch
Date: 4/13/2005 3:48:18 AM Eastern Standard Time
From: []
To: CitiWatch [at] innercitypress.org

My partner has been looking for a job recently, and got an unplanned call from Primerica offering her an interview for a "management" position. She's been studying to be an actuary and so has a financial and operations management background (although not much experience), so figured it was a good opportunity. She went to the interview and started to be concerned when they mentioned "sales", but they downplayed how much of the job was sales. They told her to go to a "benefits" meeting, and to bring me with; so, she did.
Right away, we knew something was wrong. The whole meeting was set up like an infomercial; they were trying hard to *sell* the company, *sell* the position, and even sell Weill as some sort of genius. The first 20 minutes or so of the presentation, plus any time that you got there early, was spent showing rave reviews of Citigroup and Weill from various publications. They avoided talking about what the position was for most of the meeting. My partner and I started exchanging notes, wondering what was going on. The more they got into it, the worse it became: they set up their system for employees as a pyramid scheme, with up-front costs, and pay on commission.
They even had a drawing displayed that was pretty much a pyramid, showing how you profit from those under you, and those under them. The guy speaking tried to sell it as a "get rich scheme" - by the end, he was talking about meeting with Pres. Bush, vacationing in the tropics, boasting about his various new cars (after pointing to his new Humvee, asking the audience, "How would you like to get a new hummer for your birthday like I did?"), showing off his mansion, and talking about how he plans to buy a private jet. I've never seen such unbridled greed and manipulation of jobseekers in my life; I hardly can even scratch the surface of what it was like; even the sword on the wall, right next to the presenter, was creepy.
I tried to get my partner to walk out in the middle of it, but she was embarrassed to make a scene. We both vented as soon as we got out, furious that they lied to her to get her to listen to an hour and a half sales pitch. The more I read about them, now, the madder I get about the whole ordeal.

Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of May 9, 2005: The New York Times of May 4 reported that “Citigroup lenders made hundreds of high-cost home loans to customers with poor credit histories in 2004, even though the company had adopted a policy a year earlier to no longer issue such loans, the bank acknowledged yesterday.” But Citigroup chief operating officer Bob Willumstad, who from the stage of Carnegie Hall on April 19 directly denied even the presence of HOEPA loans in Citigroup’s 2004 HMDA data, has never acknowledged that what he publicly claimed was and is not true. Citigroup’s chairman Sandy Weill, who referred the question about the HOEPA loans to CEO Chuck Prince, who passed the buck to Willumstad, was recently in Turkey with Citi Global Bank head Michael Klein, meeting with prime minister Recep Tayyip Erdogan. Watch out... On the HOEPA loans, Citigroup’s deceptions and/or cover-up were in fact even worse than reported in the New York Times. Fully 180 of the 837 HOEPA loans were reported in Citigroup’s HMDA data has having been made by “Washington Mutual Finance Group.” At first after ICP raised it, Citigroup claimed that these loans were made by Washington Mutual Finance Group prior to its acquisition by Citigroup. But as it turns out, that deal was consummated on January 9, 2004. So were the 180 loans all made in the first nine days of the year? It is striking that Citigroup chose to separately report some of its 2004 data as “Washington Mutual Finance Group,” a company it acquiring in the year’s first month. Another subprime acquisition of Citigroup’s, Easy Money, bought half-way through the year, didn’t report its own data. It appears that the only reason for Citigroup’s separate reporting for Washington Mutual Finance Group was an attempt to distance itself from the HOEPA loans, which were made AFTER Citigroup acquired the company. It just gets worse and worse....

The grapevine has it that CitiFinancial, just after having to acknowledge violating its previous “best practices” commitment, may make a *new* commitment: to drop mandatory arbitration from some loan contracts. The same grapevine -- of Citigroup’s chosen “partners,” mind you -- says that Citigroup has admitted that such an announcement would be less than meaningful at this point, after passage of the federal class action legislation and since arbitrators have shown a willingness to hear cases as a class. “Free public relations,” is how one Citigroup lawyer has characterized an announcement dropping arbitration. We’ll see.

Another indicative development: a recent fraud lawsuit by the attorney general of New Mexico against Furniture World Inc. for “delivering used, broken or damaged furniture to customers who had paid for new merchandise” also alleges that as the sale financier, CitiFinancial “continued to charge customers who had canceled contracts, which led to delinquent accounts.” (Albuquerque Journal, May 6). This is CitiFinancial’s Sale Finance program, one goal of which is to pitch high-cost home-secured loans to those who buy furniture. Employees are tracked on what percentage of such “Sales Finance Conversions” they can get the customers to undertake. A pointed question: why does CitiFinancial work with merchants like this whose defense is that they don’t provide refunds and that all merchandise is sold ‘as-is.’? Maybe the answer is somewhere in the fine print of the “Five Point Ethics Program.” Or in Turkey, where Sandy Weill was looking for it...

ICP Fair Finance Watch continues drilling deeper into the 2004 Home Mortgage Disclosure Act data. Following its petitioning last week of state attorneys general, ICP was asked to produce a study of disparities by gender as well as race. The results, being forwarded to those who requested them, are not pretty. Here’s Citigroup:

White men: 169,992 originations of which 37,974 (or 22.34%) were at rate spread

White women: 67,291 originations of which 21,689 (or 32.23%) exceeded the rate spread (1.44 times higher / more likely to be rate spread than white men)

African American men: 16,512 originations of which 8499 (or 51.47%) exceeded the rate spread (2.30 times higher / more likely to be rate spread than white men)

African American women: 16,116 originations of which 9099 (or 56.46%) exceeded the rate spread (2.53 times higher / more likely to be rate spread than white men)

Hispanic men: 22,757 originations of which 7393 (or 32.25%) exceeded the rate spread (1.44 times higher / more likely to be rate spread than white men)

Hispanic women: 9241 originations of which 3649 (or 39.49%) exceeded the rate spread (1.77 times higher / more likely to be rate spread than white men)

ICP has provide this and other analysis to the regulators and state attorneys general, demanding investigation and action, including on the issue of Citigroup’s HOEPA loans, and reportedly impending announcement about arbitration -- both may constitute false advertising....

Update of May 2, 2005: The scandal of Citigroup’s super high cost HOEPA loans -- as well as its disparate lending, particularly in its headquarters city -- has now been raised to attorneys general not only in New York, but in dozens of other states. While Citi’s press office bobs and weaves, those in charge look away and face no repurcussion. Take for example Mister Robert Willumstad. Since 2002 he’s been in charge among other things of Citigroup’s operations in Mexico and Puerto Rico. In Puerto Rico Citigroup continued blithely making HOEPA loans long after the Harry Goff commitment. When this violation of the commitment was discovered, no public disclosure was made. And on April 19, from the stage of Carnegie Hall, Robert Willumstad outright denied that there are any HOEPA loans in Citigroup’s 2004 data. One wag wondered why Willumstad (yes, that’s four W’s in a wrow) didn’t say, “I don’t know, someone will get back to you.” But this is the time for taking charge (if not responsibility) at Citi. Talk about ethics, but deny, deny, deny. And in the nearly two weeks since, there’s been no retraction, no letter to the regulators misled, not even a change to the Citigroup web site. Somewhere we heard it: “by your fruits shall ye be known.”

Update of April 25, 2005: in May 2004, Citigroup was fined $70 million by the Federal Reserve, including for violations involving Regulation Z, which implements the Home Ownership and Equity Protection Act of 1994 (HOEPA), which applies to very high cost mortgage loans (eight percentage points over comparable Treasuries on first liens, for example). Citigroup’s response including a statement that it had stopped making loans covered by HOEPA in January 2003. This statement appears, among other places, on Citigroup’s web site -- in a "http://www.citigroup.com/citigroup/citizen/consumerfinance/040527a.htm" and a "http://www.citigroup.com/citigroup/citizen/consumerfinance/index.htm" \l "doesnot".

When the 2004 Home Mortgage Disclosure Act data was released, ICP Fair Finance Watch found in Citigroup’s data at least 837 loans that Citigroup itself had reported as covered by HOEPA.

On April 19, ICP’s executive director attended Citigroup’s annual shareholders’ meeting and asked for an explanation of this seeming violation of Citigroup’s public statement of its “best practices.” Citigroup chairman Sanford Weill said that CEO Charles Prince would answer the question, but he did not. Rather, Mr. Prince referred the question to Citigroup chief operating officer Robert Willumstad, who stated that ICP must be misreading the mortgage data by incorrectly inferring from the interest rates at which Citigroup’s loans are made that some are covered by HOEPA. But in the data, there is a column with a simply yes or no answer: covered by HOEPA or not. And 837 loans in the data Citigroup provided to ICP (and to it regulators) are covered by HOEPA.

After Mr. Willumstad’s denial from the stage of Carnegie Hall, where the meeting was held, two Citigroup staffers summoned ICP’s director out into the lobby. They acknowledged that hundreds of loans in Citigroup’s 2004 data are covered by HOEPA. They put the number at 797, and according to ICP's notes broke that figure down as follows:

180 HOEPA loans attributable, they said, to the acquired Washington Mutual Finance Group pipelines or to unexplained "errors;”

29 HOEPA loans by CTB, Citicorp Trust Bank;

582 HOEPA loans by "Associates Puerto Rico;" and

six HOEPA loans by CitiFinancial Puerto Rico.

Because the meeting was nearly over, ICP’s director went back in and asked a third question: "There seems to be a disconnect between senior directors and the staff at CitiFinancial, because they've just acknowledged that Citigroup did make and report HOEPA loans in 2004, contrary to the statement on Citigroup's web site, and contrary to what Bob Willumstad just said. You should correct the statement on your web site, and all regulators you've made that representation to, forthwith."

There was no response from Citigroup. Further inquiry by ICP has found this breakdown:

611 HOEPA loans by “Associates International Holding Company;”

29 HOEPA loans by Citicorp Trust Bank fsb (fka Travelers Bank & Trust);

180 HOEPA loans by Washington Mutual Finance (now CitiFinancial); and

17 HOEPA loans by CitiFinancial Services of Puerto Rico.

It is ICP's position violates both the letter and spirit of Citigroup’s “commitment.” There are HOEPA loans reported as CitiFinancial, in 29 states as well as Puerto Rico, and it is not at all clear that these were all acquired among with the subprime lender “Easy Money,” which Citigroup acquired in 2004. Latin Finance magazine of July 2002 reported that “Willumstad will now have an oversight role in Citigroup's operations both in Mexico and Puerto Rico. Willumstad, president of Citigroup and Chairman and CEO of the company's global consumer group, will run credit cards, consumer finance and retail branch banking.” The American Banker newspaper of June 12, 2004, was even clearer: “Mr. Willumstad, 56, also assumes full responsibility for Citi's activities in Mexico and Puerto Rico.” Given Citigroup’s many statements that it was integrating and reforming Associates First Capital Corporation, that its defense now is that it could continue making HOEPA loans as long as it kept subsidiaries with the old Associates name is disingenuous and troubling. So too are Citigroup’s spin to journalists, and other rationalizations. For example, Citigroup has claimed that the distinction is that its operations on Puerto Rico only came under Harry Goff’s jurisdiction in mid-2004. But the commitment was not by, or about, one person, but rather the company. Citigroup has said that “Associates Puerto Rico” was run out of Dallas and not Baltimore. And? So what? Citigroup is in denial.

Inner City Press / Fair Finance Watch has reviewed, now for the New York City Metropolitan Statistical Area, the 2004 Home Mortgage Disclosure Act data of Citigroup, including the new information concerning which loans are subject to a rate spread (3% higher than comparable Treasuries on a first lien, and 5% on a subordinated lien), and has found that at Citigroup for all type of mortgage loans in the NYC MSA in 2004, African Americans borrowers were more than seven times more likely to receive a rate spread loan than white borrowers. Meanwhile, Citigroup denied the applications of African Americans 2.67 times more frequently than those of whites. Latino borrowers were 3.92 times more likely to receive a rate spread loan from Citigroup than were white borrowers, and Citigroup denied the applications of Latinos 2.35 times more frequently than those of whites.

Update of April 18, 2005: In a new low, Citigroup on April 13 informed ICP that the data Citigroup had given it on March 31 was incomplete and incorrect. Based on that data, provided by Citigroup the full month after ICP’s request, ICP conducted an analysis and found for example that for home purchase loans at Citigroup in 2004, African Americans were 4.34 times more likely to receive higher-cost rate spread loans than whites. Citigroup’s spokesman, asked to respond by the Associated Press and the American Banker newspaper, called ICP’s findings, and its director, “reckless,” and claimed that the data showed otherwise. See, e.g., “U.S. community group alleges Citigroup, Bank of America discriminate in mortgage lending,” by Eileen Alt Powell, Associated Press, April 4, 2005; “First HMDA Fallout - Activists Hit Citi, B of A,” by Hannah Bergman, American Banker, April 5, 2005, Pg. 1; and "Groups Make Hay of HMDA Data," National Mortgage News, April 11, 2005, Pg. 2.

On April 14, ICP received from Citigroup new compact disks and repeated its analysis. The number of originated loans and mortgage records have remained the same – 351, 811 loans and 1,218,402 records. But the number of the loans that are higher-cost rate spread loans has increased from 11,000 in the first, incorrect CD, to fully 93,103 rate spread loans in the second set of data. That is to say, the data Citigroup provided on March 31 underreported its 2004 higher-cost loans by 82,103 rate spread loans. Based on the new data, fully 26.46 percent of Citigroup’s originated loans in 2004 were higher-cost rate spread loans.

This is still lower than at HSBC, where 32.7% of 2004 loans were higher-cost rate spread loans – but it is much lower than at Wells Fargo, where 9.13% of 2004 loans were higher-cost rate spread loans. For home purchase loans, Wells Fargo denied the applications of African Americans 2.28 times more frequently than those of whites, and those of Latinos 2.02 times more frequently than whites. At Citigroup, the disparity for African Americans is higher (a denial rate for African Americans 2.54 times higher than for whites), while for Latinos it is slightly lower (a denial rate for Latinos 1.93 times more frequently than whites). These comparisons are for the holding companies as a whole, cumulating all of their HMDA-reporting affiliates.

Based on the new data, for home purchase loans at Citigroup in 2004, African Americans were 3.88 times more likely to receive higher-cost rate spread loans than whites. While this is slightly lower than the disparity, 4.34 to one, in ICP’s first study based on the data Citigroup provided, it is still much higher than for example the lenders reviewed above. Strangely, the Wall Street Journal’s April 11 report, based on Citigroup’s self-generated percentages, had Citigroup appearing less disparate than nearly all other lenders. Now it appears that the Journal’s April 11 report was based on Citigroup’s own self-presentation of its data and ratios, and not on (correct) raw data. Developing...

Update of April 11, 2005: Citigroup’s response to ICP’s analysis of its mortgage data, in which ICP as Citigroup had suggested looked at particular mortgage lending products, beginning with home purchase loans, was to call the conclusion “reckless.” This ad hominem response was delivered by CitiFinancial’s ex-journalist spokesman, to the publication he used to work for; then it was repeated to the Associated Press. See, “"http://economictimes.indiatimes.com/articleshow/1069032.cms". For a bank which has been subject to prosecution and de-licensing for both predatory lending and money laundering to characterize as “reckless” the analysis of data, using methods the bank itself suggested, is laughable.

Citigroup's March 2005 memo about its then-still-withheld data said, in the second paragraph, "As a result of these efforts, the homeownership rate in the United States hit a stunning 69% last year... efforts to expand credit, particularly through the use of risk-based pricing, have contributed to these incredible gains in homeownership."
That's why it's more than legitimate (and not "reckless") to look specifically at risk based pricing for homeownership loans. A separate methodological issue it that we'd resist including home improvement loans in the analysis since Citigroup's home improvement loans include a slew of non-secured loans for which they don't report whether the loans are rate spread or not -- including these would skew any analysis.

Substantively, even as ICP analyzes other banks’ data as it arrives, Citigroup continues to stand out. For example while at Wells Fargo for home purchase loans, African Americans borrowers are 3.9 times more like to receive a rate spread loan that white borrowers, this is still less disparate than Citigroup, at which African Americans borrowers are 4.34 times more like to receive a higher-cost rate spread home purchase loan that white borrowers. Meanwhile, Wells Fargo denies the applications of African Americans for home purchase loans 2.3 times more frequently than those of whites, nearly as disparate as Citigroup’s 2.6 to one denial rate ratio between African Americans and whites.

Perhaps rather than spend its staff time on spin, and then insults, Citigroup ought to focus on improving its performance, including fair lending performance. Paraphrasing “Don’t move, improve,” the message / lesson to Citigroup is “Don’t schmooze, improve.” We’ll see.

Update of April 4, 2005: The 2004 Home Mortgage Disclosure Act data has come out, not unlike pulling teeth. Inner City Press has done an analysis of a half-dozen banks, and found the the largest (and most disparate) among them to be Citigroup -- click "http://www.innercitypress.org/2004hmda.html" to view. ICP’s top line finding so far with the 2004 data is that at Citigroup for home purchase loans, African Americans borrowers are more than four times more likely to receive a higher-cost / rate spread loan than white borrowers. Meanwhile, Citigroup denied the applications of African Americans for home purchase loans 2.6 times more frequently than those of whites.

Citigroup’s rate spread disparity for Hispanics was even worse: for home purchase loans, Hispanic borrowers are 6.48 more than six times more likely to receive a rate spread loan from Citigroup than are non-Hispanic white borrowers.

Citigroup has been providing pre-data “spin” to numerous reporters, complete with a talking points update labeled “not intended for public use or dissemination.” ICP’s sourcing for this is from reporters, one of whom told ICP, “They must really have something to hide, to be spinning so hard.” There’s probably more; ICP’s analysis continues. The above-identified disparate treatment by Citigroup of people of color seeking to own their homes is decidedly more pronounced, and more troubling, than for example National City Corporation’s two-to-one disparity reported in the Wall Street Journal of March 30, 2005. National City apparently presented its data in the light most favorable to it, leading to the summary conclusion that African Americans are 2.21 times more likely to receive rate spread loans than whites at National City, and Hispanics 1.26 more likely. See, “Blacks Are Found to Pay High Rates for Home Loans,” WSJ of 3/30/05, D2.

National City’s over two-to-one disparities are troubling -- but they cast Citigroup’s four-to-one disparity for African Americans, and over six-to-one disparity for Hispanics seeking home purchase loans in starker contrast. The nation’s largest bank is also its most disparate, when it come to targeting people of color with higher-cost home purchase loans. On this and the other Citigroup abuses / scandals, watch this space.

Update of March 28, 2005: While the Federal Reserve has put its unique cap on significant expansion by Citigroup, it has yet to take other appropriate actions, not only on CitiFinancial’s ongoing predatory lending, but also on retaliation and systems breakdown elsewhere in the bank. First a predatory lending sample, then a follow-up on our whistleblower’s report from two weeks ago.

Subj: citifinanial

Date: 3/21/2005 8:40:57 PM Eastern Standard Time

From: [ ]

To: CitiWatch [at] innercitypress.org

My mother in law just found out today, by reading the local paper, mind you, that her house and land are to be auctioned off two weeks from now at a public auction. CitiFinancial was her lien holder. She has been paying them thousands of dollars over her min. payment and has receipts. She was never served. Never notified of even being in default. She never would have known what was going on if my brother-in-law didn't read the paper. Has anyone else had their house auctioned off by CitiFinancial without ever getting any kind of notice? Does this sort of thing happen often with them? What can be done?

Ask, among others, the Federal Reserve, which has fined CitiFinancial $70 million for predatory lending, but still needs to follow-through. Speaking of following through (on our whistleblower report of two weeks ago), among other other missives this came in this week:

Subj: Citigroup Audit

Date: 3/23/2005 11:07:22 AM Eastern Standard Time

From: [ ]

To: CitiWatch [at] innercitypress.org

The group that audits Citigroup's domestic consumer operations is run by one Thomas Anderson. Thomas Anderson knew about situation with the whistleblower in your March 13 piece, and particularly about the fact that the whistleblower brought to Senior Management's attention flawed audit of Commercial Business operations.

A friend in the know (a Citibank officer who works in the Long Island City facility where Anderson has his office, and who also has a contact in Audit) informed me that, prior to becoming head of Domestic Consumer Audit, Mr. Anderson ran other Citibank divisions, including a credit card operation. Right before his appointment to Audit, Mr. Anderson's business was undergoing an internal audit. The auditors were preparing what was reportedly an adverse report on the operations Anderson was responsible for when they received a call from "somebody". This "somebody" informed them that they might want to "rethink" what they were about to publish as they were about to get a new boss in Audit; and that boss was Anderson himself.

Another friend, a former Citigroup officer, tells me about the background of the Audit Director (under Anderson) who is responsible for auditing the business operations of the consumer group. This individual is Mr. E. Ramos. Prior to joining Audit, Mr. Ramos ran a Citibank loan portfolio in Puerto Rico. By all accounts, the portfolio "blew-up" (loan losses) and the Global Consumer Risk Officer (name available upon request) was ready to "can" Ramos. Anderson reportedly stepped-in and said he wanted to work with Ramos, and gave Ramos a job in Audit. Ramos has since elevated to a prominent position. Ramos and Anderson were in direct contact with the whistleblower in the March 13 piece. They knew that the whistleblower asked for Audit to be thoroughly investigated.

We are also informed that

“There are several SCO's (Senior Credit Officers) at Citibank who contributed to the retaliation who at still at Citibank. One, in particular, was instrumental in the Citibank purchase of EAB (Bruce Fletcher, SCO, Global Risk). A few more ‘migrated’ over to JP Morgan Chase (how's that for a boy's club?). Whistleblower can also prove to anyone willing to listen how he demonstrated to Compliance, Global Risk and HR how Audit is compromised. Whistleblower also worked on shared syndicated loan between JP Morgan and Citibank, and uncovered JP Morgan tampering with publicly traded company.”

Among Citi-now-JP Morgan (well, Dimon) connection in all this is one John Watkins. Another story-inside-Citi:

“The new thing at Citigroup: going forward, if a unit fails an internal audit, the "responsible" unit managers have to meet personally with Prince and Willumstad. So what? Willumstad, by the way, was so anxious to use the bank's money to buy good press and goodwill that he authorized a wire transfer a couple of years ago in excess of one million US dollars thinking he was contributing to [a non-profit]. Turned out the money went to some trailer in a park in California, then it was forwarded to a destination in Europe. The Feds were called and an arrest was made of a man in the trailer, but the money wasn't recovered. How does a bank, of all places, fall for such a scam? This story came straight from the lips of the Senior Manager at Corporate Headquarters assigned to "plumb" the transaction. And wasn't Willumstad (along with Magner, among others) "on watch" and repeatedly promoted while Citigroup's reputation went down the drain amid increasing scandals? So how credible is it to have such an executive sit in judgment of anybody?”

We’ll have more on this.

Update of March 21, 2005: Following last week’s ICP reporting on the Federal Reserve’s order that Citigroup should not expect any approval for “significant expansion” for the foreseeable future, there’s time to look more closely at the "http://levin.senate.gov/newsroom/supporting/2005/pinochetreport.pdf" from the U.S. Senate, which states that its “investigation has determined that Citigroup had a substantial, years long relationship with Augusto Pinochet and his family"... Only in "response to Subcommittee requests, Citigroup has identified 63 U.S. accounts and certificates of deposit that were opened for Mr. Pinochet and his family in New York and Miami at various points in time from 1981 to 2004... It was not until July 2004, two years later, that Citigroup first alerted the OCC to its years-long relationship with the Pinochet family.” The report at page 82 deadpans that Citigroup “declined to provide any information in response to Riggs’ Section 314(b) requests. When the Subcommittee asked why, Citigroup pointed out that, at the time the requests were made, Riggs was under civil and criminal investigations raising questions about the bank’s management and operations." That's ironic -- because under that standard, no one should answer Citigroup's questions either...

In other Citi global sleaze, Citi’s former head of emerging markets Victor Menezes may face civil charges in connection with the sale of $29.8 million worth of company stock in March 2002, weeks before the company took a charge because of losses in Argentina. The SEC sent Menezes a Wells notice in August 2004, which was only reported on March 18, the day after the Fed’s Citi-First American Bank order, reported on immediately below.

Update of March 18, 2005: In the Federal Reserve Board’s "http://www.federalreserve.gov/boarddocs/press/orders/2005/20050316/" issued late on March 16 on the Citigroup - First American Bank application on which Inner City Press / Fair Finance Watch has been commenting since October 2004 -- not only on predatory lending issues, but also Citigroup’s serial crises in Japan, the European bond market, and, only yesterday, money laundering for Pinochet -- the Fed states as follows:

“Given the size, scope, and complexity of Citigroup’s global operations, successfully addressing the deficiencies in compliance risk management that have given rise to a series of adverse compliance events in recent years will require significant attention over a period of time by Citigroup’s senior management and board of directors. The Board expects that management at all levels will devote the necessary attention to implementing its plan fully and effectively and will not undertake significant expansion during the implementation period. The Board believes it important that management’s attention not be diverted from these efforts by the demands that mergers and acquisitions place on management resources.”

As "http://cbs.marketwatch.com/news/story.asp?guid=%7B419E9E43-8F31-4454-83BA-97F8961572B8%7D&siteid=google&dist=google&dist="'s David Weidner, "The Fed challenge does not entirely come out of the blue. Inner City Press/Fair Finance Watch, a Bronx, N.Y.-based community group, opposed the First American acquisition citing Citigroup's lending practices and the scandals faced by the bank. 'Unless Citigroup actually improves its practices, rather than only its public relations as has until now been the case, this block on expansion should become permanent,' said... the group's executive director. 'The Fed should not have given Citigroup any merger approval given the scandals that are swirling around it.'"

Initial press reports entirely missed the above-quoted language from the order and merely noted the approval, and (near-meaningless) antitrust numbers. ICP/Fair Finance Watch endeavored to correct this, emphasizing the above: the Fed “expects” that Citigroup “will not undertake significant expansion” for the foreseeable future. The Fed’s inappropriate failure to address last week’s comment and Report (below on this page), and yesterday’s "http://levin.senate.gov/newsroom/supporting/2005/pinochetreport.pdf", will be inquired into going forward. The Order also acknowledges disparities in Citigroup’s mortgage lending and other issues ICP raised (click "http://www.federalreserve.gov/boarddocs/press/orders/2005/20050316/attachment.pdf" for PDF of the Fed's order) -- but the above-quoted seemed noteworthy. On this, ICP’s position: While the Fed should not have given Citigroup any merger approval given the scandals that are swirling around it -- from money laundering including for Augusto Pinochet and in Japan, to rogue bond trading and predatory lending -- ICP take note of the Fed implying that Citigroup can’t expand any more, for the foreseeable future. Unless Citigroup actually improves its practices, rather than only its public relations as has until now been the case, this block on expansion should become permanent.

The press coverage by Thursday afternoon noted the language, but quoted a slew of industry analysts trying to first minimize then generalize its import. "http://money.cnn.com/2005/03/17/news/fortune500/citigroup_fed.reut/?cnn=yes" a former Fed associate general counsel that "the Fed is not saying Citigroup can't make acquisitions." Dow Jones newswires later quoted ex-Comptroller Jerry Hawke that "If Citigroup is told in the context of a small, not terribly consequential acquisition that they should steer away from more substantial mergers until they get their risk management in shape, that's a message to everybody." Of course, it might be be so "inconsequential" if you lived in a community previously served by First American Bank, now to be replaced if the Fed has its way by "Doctor Evil." DJNS noted that "the Fed's guidance to Citigroup was buried in its order approving the deal, with a number of banking experts only discovering it Thursday after reviewing what at first glance seemed like a routine bank order." But Inner City Press has learned that a Federal Reserve staffer urgently called Washington media outlets trying to reach reporters directly after 5 p.m. on Wednesday, to specifically alert them that an order, presumably important and out of the norm, was coming. So why was the language missed "at first glance"? Perhaps because Citigroup has been so embroiled in scandals, for so long, that it seems normal. It is not. On Friday the WSJ, which has generally turned a blind eye to number of Citi-scandals, including predatory lending, chimed in that "From time to time, the Fed has placed similar restrictions on other institutions, but rarely on such a large institution, in writing and in such a public form." The Citi - FAB order was public because the application was challenged; Fifth Third for example, and PNC before it, needed nods from the Fed to even consider acquisitions. But the language in this order is unique.

"http://cbs.marketwatch.com/news/story.asp?guid=%7B419E9E43-8F31-4454-83BA-97F8961572B8%7D&siteid=google&dist=google&dist=" a professor from NYU that "Citigroup will have to open a backdoor dialogue with the Federal Reserve and receive tacit approval before pursuing a deal. 'They'll have to have assurance it's worth the bother.'" But the Fed is not allowed by pre-approve (or "tacit[ly] approv[e]") merger applications, which are subject to public comment, the Community Reinvestment Act, and other statutory factors. "Backdoor dialogue" with a rogue bank would not be appropriate. The Fed should stick to it, and also take appropriate enforcement actions against Citigroup.

Update of March 14, 2005: This week’s Citi-Watch story, recounted here and to the Federal Reserve, involves a breakdown, seemingly intentional, in Citibank’s auditing and safeguards, followed by a cover-up and retaliation against a whistleblower. Three senior credit officers were fired in April 2004. The whistleblower who brought the fraud to light (and reported it upwards in the company) was let go as well, but remains concerned about Citigroup’s ability to retaliate more broadly throughout the industry. Therefore this is as much detail as can for now be given:

The underlying loan was to business in Suffolk County, New York. The loan was initially originated by European American Bank; Citibank took over the loan along with "http://www.innercitypress.org/citieab.html". The soon-to-be whistleblower, an individual entrusted by Citibank with teaching in the bank’s credit training program, became aware of problems with the loan. The audit department had ostensibly reviewed the loan but had done nothing. Later the loan was referred from a line lending unit to the work-out / collections department, and yet more credit was extended.

The whistleblower, having pointed out the irregularities, began suffering retaliation, and complained as high as possible, including to “Global Compliance.” Nothing was done (except to prepare the ouster of the whistleblower). The underlying borrower released financial statements suddenly showing a large loss, resulting in a December 2004 write-off by Citibank of the loan to the tune of $8,000,000. Additionally, the whistleblower showed senior management how Citigroup's computer systems are seriously compromised, demonstrated how Citigroup employees with basic systems clearance can log on and view customer deposit accounts -- consumer checking and savings accounts and balances -- as well as the accounts of fellow Citigroup employees. The individuals implicated are precisely those involved in the attempt to acquire First American Bank. Citigroup executives aware of the retaliation include Ajay Banga, and, it is reported, Marge Magner. The Federal Reserve and OCC, and others, have a duty to inquire. We’ll see. Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of March 7, 2005: CitiFinancial’s mandatory arbitration clause has been found to be “unconscionable” in North Carolina by Durham County Judge Ronald Stephens. The suit was filed in Vance County, north of Raleigh, in 2002 by CitiFinancial customers Fannie Lee Tillman of High Point and Shirley Richardson of Henderson. Their suit accuses CitiFinancial, formerly doing business as Commercial Credit Loans Inc., of excessive and improper fees. It’s important to note this case has nothing to do with Associates First Capital, but rather the subprime operation designed since 1986 by those now controlling Citigroup.

How this fits in to the 25-minute revisionist video Citigroup began screening last week for its employees is not yet clear, nor have the just-hired Howard Baker’s views on CitiFinancial’s practices beyond the U.S. been inquired into yet. On March 1 in Singapore, Marge Magner announced that Citi “will be opening 200 branches across Asia for consumer finance.” Magner said countries that would see more Citi outlets this year include India, Indonesia, Thailand and the Philippines. Unconscionability goes global... Of Howard Baker, note that the law firm he was at, Baker, Donelson, Bearman, Caldwell & Berkowitz PC, has represented CitiFinancial on predatory lending-related matters...

Update of February 28, 2005: Falling fast: France's treasury gave Citigroup a ranking of sixth out of nine financial institutions in its overall 2004 league table list, a lower ranking due to the Citi’s $16 billion “Doctor Evil” bond trade in August. The treasury's list is used to award government business and helps determine which banks are awarded bond syndication and derivatives trading mandates or lead roles in state privatizations. The treasury said that Citi's ranking would have been higher were it not for the August trade. So there are some ramifications - but with a trillion-dollar bank, internally they figure they make more from rogue behavior than they lose. For now, at least.

From inside:

Subj: Re: Citigroup Watch -- An Update From an Employee

Date: 2/23/2005 7:51:31 AM Eastern Standard Time

From: [ ]

To: CitiWatch [at] innercitypress.org

...note the very sudden and unexpected Citigroup's axing of all their Technical Research Department (last week). Oddly enough it was only their technical research led by Louise Yamada (widely renowned and acclaimed) that was worth any salt at all. Many of the retail Smith Barney Portfolio Manager consultants that run portfolios themselves (similar to mutual fund managers) followed Louise's group very closely and are very displeased. With the understanding of how much revenues these brokers bring in, I am curious to see what the shakedown will be -- who leaves? In any case, Citigroup is basically reiterating the fact that investment banking alone paid for research in the past.

Update of February 21, 2005: Last week’s Citigroup ethics news -- don’t laugh! -- was the announcement that “Citigroup staff will be able to dial in to an ‘ethics hotline’ and give anonymous feedback on managers as part of a plan aimed at preventing further regulatory and legal problems.” Sounds great -- except that CitiFinancial, for example, has long had an Ethics Hotline, yet whistleblowers’ calls never resulted in any reforms, and not infrequently resulted in retaliation against those who blew the whistle. Citigroup’s biggest shareholder, Saudi Prince Alwaleed bin Talal, has characterized the current scandals as “events here and there, such as the one in Japan in private banking and the bond market in Europe.” The Financial Times quotes CEO Prince that “while he is planning a further strengthening of Citigroup's compliance and audit processes the plan is not about ‘hiring cops.’ It is about making the cops ‘redundant.’” Hmm. Meanwhile, a 25-minute video entitled “The Story of Citigroup” is being prepared for (required) viewing by employees in March. If it’s anything like the video shown at least April’s shareholders’ meeting, caffeine or Clockwork Orange eye-wear will also be required...

Update of February 14, 2005: Financial literacy in the Kremlin: last week, Russian president Putin met Sandy Weill. During the meeting, Weill suggested that Putin open a credit card account with Citigroup. Putin responded: "I need to see your interest rates.” Good question.... From Business Week’s Feb. 14 “Scrambling to Save Face” article: “consumer finance -- the business of extending unsecured loans at double-digit interest rates. Citi has been a player in Japanese consumer finance since 2000, when it took over a trio of brands with 1,000 consumer loan outlets nationwide.” Double digit interest rates... In layoff news, Citi’s Smith Barney unit fired at least six stock analysts last week. Dow Jones named names: Craig Berger, semiconductor equipment; Richard Davenport, supply-chain analysis; Joanne Fairechio, gas utilities; Richard Holohan, packaging and containers; Daniel McKenzie, airlines; and Jill Krutick, toy and leisure (gonna have a lot of that, now, one wag said). These layoffs are in addition to cuts at Citigroup's corporate and investment bank that are expected to affect about 1,000 of that unit's 48,000 employees. Meanwhile Citigroup’s application to buy First American Bank in Texas, on which ICP commented on October 25, continues to pend at the Federal Reserve Board...

Update of February 7, 2005: The corporate business press pegged the announced sale of Citigroup’s Travelers Insurance to Met Life as the death-knell of the ideas of conglomerates and cross-selling. Travelers bought Citicorp, putting the Weill - Prince - Willumstad - Magner axis in the driver’s seat, from which they’ve now sold off insurance. But Citi’s press release said, “In connection with the transaction, Citigroup and MetLife have entered into ten-year agreements under which MetLife will greatly expand its distribution by making products available through certain Citigroup distribution channels, subject to appropriate suitability and other standards. These channels include Smith Barney, Citibank branches, and Primerica in the U.S., as well as a number of international businesses.” Interestingly, although it sells insurance, including credit insurance, CitiFinancial was not listed... Investigations of Citigroup’s predatory bond trading -- which Citi’s employees called their “Doctor Evil” plan -- last week spread from Germany to Italy, Spain and Portugal. The European Central Bank president urges a "thorough and deep" investigation. Citigroup’s application to buy First American of Texas, on which ICP filed opposition in October, is still pending. It’s hard to imagine Citigroup, embroiled in scandal, being a buyer not a seller. Stock analysts said the cash could be used to buy a credit card unit, or to “accelerate its plans to open 300 to 500 consumer finance offices.” Yes, that’s CitiFinancial...

Update of January 31, 2005: Ah, Citigroup. On January 24, the Germany regulatory agency Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) made a referral to criminal prosecutors of Citigroup’s bond manipulation of August 2004. Citigroup Global Markets sold some $15.7 billion US in European government bonds on 13 different trading platforms in 11 different markets, causing prices to fall across the board; Citi then bought back roughly $5.3 billion in bonds at lower prices an hour later. Citigroup has been claiming this is a much smaller scandal than its loose anti-money laundering practices in Japan; we’ll see. On January 25, ICP filed supplemental comments with the Federal Reserve opposing Citigroup’s pending application to buy First America Bank in Texas...

Update of January 24, 2005: Going global, including with subprime: on the Jan. 20 earnings call, Chuck Prince spoke of Citigroup’s focus on international growth as its income generated outside the U.S. rose 43 percent in 2004. "Mexico is up. Asia is way up," Prince gloated. It was not clear to some how the shut-down in Japan impacts these numbers; then it was clarified: the latest quarter's earnings reflect a $244 million after-tax charge to close the Japan Private Bank and a $131 million after-tax reserve taken in relation to the expected resolution of a But investigation of transfer-agent matters. But the charges were offset when Citigroup released cash from its loan-loss reserve and an insurance recovery against WorldCom and Enron. Great... "We increased our stake in Brazil just recently,” Prince continued. "I think that we are going to do very, very well in the future.” In Japan consumer finance, building on The Associates’ predatory inroads there, “CitiFinancial Japan KK” now plans to increase its fleet of automatic consumer loan application machines about 40 per cent this year. The Citi subprime unit operates such consumer finance companies as AIC Corp. and DIC Finance Corp in Japan... More corporate Citi-watchers wondered why on January 21, Citigroup's Fixed Income Investor Presentation was cancelled and postponed to February 11. Some suggested that the cancellation was in honor of the just-deceased Walter Wriston (who one wag quipped is now trying to find a loophole into the afterlife); others saw darker motives.... Those who can’t waiting until Feb. 11 can catch COO Bob Willumstad at his own firm’s (Smith Barney’s) Financial Services Conference on January 26 at 12:45 PM -- and maybe ask him about these Japan high-cost loan machines...

Update of January 18, 2005: From the mail bag, responding to last week’s squib:

Subj: Wombold
Date: 1/10/2005 2:06:26 AM Eastern Standard Time
From: [14 year Manager]
To: CitiWatch [at] innercitypress.org
I was intrigued by reading your follow up to the Wombold case. As a former CitiFinancial Manager, I know how money grubbing these individuals are/were. The objective at Citi continues to be to make the maximum profit possible on each customer without regard for "doing the right thing" (their motto by the way) At Citi, doing the right thing is whatever is best for the company's bottom line. By the way, I would love to hear their response to the heavy prepayment penalties CitiFinancial imposes on their real estate loans. Customers also can't refinance with CitiFinancial without taking an additional cash advance of $10,000 or more in many cases. This includes a refinance for lower rate purposes only. In other words, the only way to get a lower rate mortgage is to wait until your prepayment penalty expires or by taking a BIGGER loan out. They never waive the prepayment penalty, EVEN IF THE CUSTOMER SELLS THEIR HOME... Color me glad I left after 14 years...

Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of January 10, 2005: Citi-watchers may want to read the just-released "http://www.lawlibrary.state.mt.us/dscgi/ds.py/GetRepr/File-37834/html", in Wombold v. CitiFinancial / Associates, affirming among other things that Associates / CitiFinancial “violated the Montana Consumer Loan Act.” Further afield, Citigroup is being fined for consumer fraud in India:

“The Visakhapatnam District Consumer Forum has directed the Citibank not to make illegal demand and pay Rs.10,000 as compensation to a consumer for deficiency in service. An agent of the foreign bank wooed a consumer, A.B.V.K. Ramalingeswara Rao of Ukkunagaram into taking a credit card, which allows drawal of emergency cash from any of the ATMs. For this the consumer needs a pin number, which the bank promised to send shortly. Even before the consumer received the pin number, the agent informed the consumer that the latter had withdrawn Rs.5,000 on his credit card and had to repay Rs.5,146.60 as outstanding dues. Stunned by this, the consumer explained he was yet to get the pin number. The consumer later received the pin number but without opening the sealed envelope, he went to the branch office of the bank in the city. From there, he was asked to contact the Citibank's Chennai office. The latter, to his surprise, alleged that he had used the Indian Oil Citibank card which he held for the last two years and which could also be used to draw the money. However, the consumer was not aware of it until he was told about it. Also, the number of Indian Oil card, which he was said to have allegedly used and the card, which he possessed were different. When his repeated pleas went in vain and he was harassed by the bank's agents, the consumer filed a complaint (Consumer Dispute No: 696/2004) against the Citibank.”

More "http://www.hindu.com/2005/01/08/stories/2005010805320300.htm", from India’s National Newspaper, “"http://www.hindu.com/2005/01/08/stories/2005010805320300.htm"." From Montana to India...

Note of January 3, 2005: The Federal Reserve, still considering Citigroup’s attempt to buy in Texas, should read Bloomberg News’ most recent "http://www.chron.com/cs/CDA/ssistory.mpl/business/2971806" of Citigroup’s lack of anti-money laundering controls), and take action on them...

Update of December 27, 2004: CitiFinancial is now offering high-cost loans through pawn shops in Poland. The Polish News Bulletin of December 20 reported that “Kantor Polski (KP), a new financial services provider was launched today... The idea of forming KP was put forward by The Polish Currency Exchange and Pawnshop Association (SKiLP). Apart from the normal services currency exchanges supply, KP will offer clients CitiFinancial (financed by Bank Handlowy) consumption and cash credits.” Great... Even during this holiday week, we've heard from people in-the-know that Citibank's Private Bank in Japan was hardly unique in the Citigroup family -- but more on that in 2005.

Update of December 20, 2004: Citigroup’s fast-and-loose practices, well beyond CitiFinancial’s insurance-sales and other predatory high jinks, begin to come home to roost: an account at Citigroup’s recently-sold subsidiary in Saudi Arabia will be charged with being used to collect and pass funds to organizations which then used the money to help suicide bombers and their families. It’s the Account 98 scandal. According to London’s Sunday Times, “Leah Johnson of Citigroup, its parent company, said: ‘Any assertion that Citigroup supports terrorism in any way is an outrage.’” But having so demonstrably loose a know-your-customer regime, for example in Japan (regulators’ order against Citigroup is available via "http://www.fsa.go.jp/news/newse.html "), is the real outrage...

Update of December 13, 2004: Citigroup’s subprime unit, CitiFinancial, repeatedly charged with predatory lending including even by the Federal Reserve, is now slated to dramatically expand, in the U.S. and beyond. Last week Citigroup announced that CitiFinancial will be opening 400 new branches in North America, will be entering Russia (as it has Australia, Indonesia and Finland, in 2004), and, in Japan, will set up a 100 automatic loan application machines and branch offices in 2005 -- under the trade name CFJ KK. This last was bragged about by Dave Lowman of CitiFinancial International, to the Nikkei Financial Daily. In New York, Citi’s Kevin Kessinger told an investors’ conference that even before the 400 new slated branches, CitiFinancial has 2,273 branches in the United States, Canada and Puerto Rico; in Mexico, going under the name Credito Familiar, it has 199 branches.

In continuing fall-out from Sandy Weill, the master of CitiFinancial and Commercial Credit before it, last week Southern District of NY Judge Gerard Lynch allowed the case against Citigroup for the AT&T (Sandy-Grubman-Armstrong) ratings games to go forward, In Re Salomon Analyst AT&T Litigation, 02 Civ. 6801. For those who forget, Weill was told by AT&T chair [and Citigroup board member] Armstrong that Grubman's negative ratings of AT&T were hurting Salomon's bid for AT&T's investment banking business. [Salomon Brothers has since been renamed Citigroup Capital Markets.] Weill allegedly urged Grubman to take a "fresh look" at AT&T, and Grubman did that and changed his rating on the stock...

ICP has put directly in front of the Federal Reserve, in the form of a supplemental comment on Citigroup’s pending application to acquire First American in Texas, Citigroup’s meritless lying to Bloomberg News (see last week’s Report), and the total or selective breakdown of Know Your Customer at Citigroup. We’ll see...

Update of December 6, 2004: After Citigroup’s denials, Bloomberg News of Nov. 30 nailed it down: “Yasser Arafat controlled a company that Palestinian Authority documents show held a $ 6.8 million account at Citigroup Inc., Palestinian legislators Hanan Ashrawi and Azmi Shuaibi have confirmed. The company, Palestine Commercial Services Co. (PCSC), held the account until it was transferred to the Palestine Investment Fund, according to the fund's 2003 annual report. The fund was created in 2002 to consolidate the PA's assets and bring them under the control of its Finance Ministry. Palestine Commercial Services ‘was a company that was founded by Arafat,’ Ashrawi, 58, a former member of Arafat's cabinet, said in a telephone interview from Ramallah. ‘He had the authority.’ Disclosure of an account linked to Arafat is an embarrassment for Citigroup.. Charles Prince and Michael Schlein, a senior vice president who oversees public relations and ethics programs, called Bloomberg last week to demand a previous story about the account be retracted. They refused to be interviewed by a Bloomberg reporter. ‘Citigroup does not have any accounts for Yasser Arafat - and we never have,’ company spokeswoman Shannon Bell said in a statement issued November 19... The PCSC account was held at Citigroup's private bank, Andreas Martin, a Standard & Poor's analyst who helped value the assets for the Palestine Investment Fund, said in a November 16 interview... Palestinian and Israeli officials agree Arafat controlled PCSC, the company that held the Citigroup account.” But Citigroup denied this...

Update of November 29, 2004: CitiCapital, which last week proposed to sell its (capitalized) Transportation Finance Business based in Dallas and Toronto to GE Commercial Finance for approximately $4.4 billion, is also a lender to, among others, private prison companies, and providers of privatized military services. As simply one example, as recently as August 2004, CitiCapital extended credit to, and filled a UCC lien against, Wackenhut, which runs private prisons including Australia’s notorious Woomera asylum-seekers’ processing center. Citigroup's lack of standards runs deep...

A follow-up to last week’s report. An inside-Citibank reader whom we respected has protested that Robert Annibale is one of the good guys. To clarify, that may or may not be: our point is that an individual carrying the water of, and seeking to get good will for, Citigroup should be prepared to answer obvious questions about the company. Even staid Business Week, of Nov. 29, reporting on Citigroup’s “support to micro lenders in developing countries,” posited the motive: “As Citi positions itself to be the banker of choice globally, it is already building a name for itself in the developing world. In addition, CEO Charles O. Prince is trying to clean up Citi's image after highly publicized regulatory problems this year in London, Tokyo, and elsewhere. Philanthropy plays a starring role, says Citigroup Foundation President Charles V. ‘Chip' Raymond: `It's critical to helping us.'” [Why BW added “Chip” but not “Chuck,” we don’t know.] For more poignant example, the question asked of Annibale: how can Citigroup on the one hand claim to be benevolently helping micro-credit to the poor, while being charged repeatedly with predatory lending to the poor? ICP posed a similar question to, for example, Robert Rubin on WNYC Radio in New York, where it also went unanswered. (See below, Archives, and note in last week’s WSJ Rubin’s inside-play for Sears/K-Mart fees for Citi: very classy, like the calls he made for Enron). Anyway, these are fair and obvious questions, which will continue... And a clarification about Citigroup’s poisoning of micro-credit: last week, Mark Malloch Brown, the United Nations Development Program (UNDP) Administrator, said that Citigroup is “now mainstreaming microfinance into its banking activities around the world.” Yeah -- it’s called CitiFinancial, and high-cost micro-insurance, and it’s not pretty. United Nations beware!

Update of November 22, 2004: Citigroup can use, abuse and poison almost anything. On November 16, 2004 at Columbia University in New York City, the present and future of microcredit was discussed by a five-person panel which included two representatives from the U.N., and two individuals affiliated with Citigroup. Even beyond these two Citigroupers, the U.N. representatives referred repeatedly to Citigroup vice chairman (and ex-IMF official) Stanley Fisher. Thus it appears that, at least for the U.N. and the self-defined elite of the microcredit industry, the world’s largest bank is the leader of banking for the poor.

There’s a problem, however. Citigroup has been charged with predatory lending to the poor, not only by consumer advocates, but by the Federal Reserve Board, the Federal Trade Commission, and other governmental agencies. Citigroup’s seeming “capture” of microcredit as-industry does not bode well.

During the November 16 discussion, Citigroup’s Robert Annibale stated that through time, Citigroup might be the originator or “booker” of the retail loans made by microfinance institutions. He said that Citigroup might sell “micro-insurance” through the microfinance industry’s distributions network, which “digs deeper,” he said, into the target population.

Mr. Annibale was asked, by Inner City Press/Fair Finance Watch, to address the incongruity between the activities of CitiFinancial and its predecessors, which have led to governmental charges of predatory lending, and Citigroup’s claimed role in micro-finance. His response alluded to codes of conduct and legislative change in various countries, but did not address Citigroup’s predatory lending settlements directly. If anything, letting Citigroup have a hand in designing the legislative proposals put forth by the microcredit industry might explain this industry’s elite’s lobbying against usury caps and other potential consumer protection laws.

A representative from Women’s World Banking, Nancy Barry, did distinguish between loans for small business and loans for television sets and the like (and stated that the latter makes up 90% of the purported micro-finance loans in South Africa). In a discussion following the panel, one wag speculated that Citigroup might assist microfinance institutions to make loans to prop up Citi’s own “television” and other consumer finance lending. While microfinance certainly has promise for those in need, its capture by the likes of Citigroup is a troubling development...

Citi classic -- from Charles O. Prince III, to Fortune Magazine interviewer (and Buffett ghost-writer) Carol Loomis: “We used to have a model where we'd wait for Sandy to shoot a moose and drag it home, and we'd all feed on it. That model doesn't work anymore because the family's too big. We have to grow our own food.” Feeding on the moose -- like Associates First Capital, and Commercial Credit / CitiFinancial before that -- that Sandy dragged home...

Update of November 15, 2004: From inside CitiFinancial comes this warning: customers will beginning to be solicited to refinance / rewrite their loans at so-called “Customer Appreciation Days,” with fees added in, to put the payment dates back into 2005. Some appreciation...

Update of November 8, 2004: From Citigroup’s November 4 response to ICP’s submission of Uniform Commercial Code filings by Citi and its proposed acquisition, First American Bank:

“ICP attaches certain records of [UCC] filings related to several Citigroup and FAB clients... As a practice, Citigroup and its bank subsidiaries do no engage in the business of funding check cashing or payday lending businesses. Citigroup’s account opening procedures and credit policies generally prohibit the opening of new accounts for businesses identified as check cashing operations. Citigroup does have a single active relationship with an armored car company that also includes a checking account to an affiliate in the check cashing business. This account predates the Citigroup procedures for check cashers, and Citigroup has been in the process of winding down the relationship pursuant to a gradual exit strategy.

“In addition, on occasion check cashing businesses have become customers in connection with Citigroup’s acquisition of other financial institutions. In such cases, Citigroup undertakes a post-acquisition review of these relationships and takes action to close or limit them, when appropriate. Citigroup makes changes to conform with its business practices as expeditiously as commercially reasonable, yet in a manner that does not unduly disrupt the operations of an existing client... The UCC filings relating to Citigroup that were attached to ICP’s comment letter are dated 2001 and 2002. Citigroup has no active accounts with, and no outstanding loans to, any of the parties named in those UCC filings. Although some of these inactive accounts may still appear on Citigroup’s account system and Citigroup may not have revoked the UCC filings, Citigroup has not had a business relationship with any of these companies for at least two years.

“With respect to the UCC filings related to FAB that were attached to the comment letter, Citigroup has learned that they relate to pawnshops, not check cashing or payday lending operations.”

Citigroup’s response is noticeably silent on when this “policy” was adopted. Citigroup states that it “has not had a business relationship with any of these companies for at least two years.” But, simply as one example, there is a February 20, 2003 UCC amendment, on “Debtors: MONTGOMERY CHECK CASHING CORP., Secured Parties: CITIBANK, N. A., AMENDMENT, 2/20/2003, 5:00PM, 1675531, 1675531, NJUCC.” February 2003 is, obviously, within two years of the date of Citigroup’s response.

Citigroup did not respond to ICP’s presentation into the record of, for example, the relationships between Citigroup and Dollar Financial; questions must be answered concerning the application of these claimed policies to all of Citigroup’s subsidiaries, including for example its investment bank(s) and CitiCapital, which it has owned since acquiring Texas-based Associates First Capital Corporation. (ICP has submitted exhibits to these effects, and also touching on Citigroup’s proposed acquisition of much of ABN AMRO's custody, securities clearing, and fund services business, particularly in Indonesia, Russia and Holland...

Where-are-they-now update: a reader has responded to our “extra credit” question regarding the whereabouts of ex-Skadden Arps Citi-defender Stacie E. McGinn. According to this reader -- who would know, and whose contact we appreciated -- Ms. McGinn is now in Charlotte, NC, in the consumer financial services legal division of Bank of America...

Update of November 1, 2004: ah, Citigroup, hit by record NASD fines, just after Japan's Financial Services Agency (FSA) cited a long list of problems at Citi's Japanese private banking unit, including failure to prevent possible money laundering and making loans to clients engaged in various forms of wrongdoing, including tax evasion and stock manipulation. The regulator also claimed bankers misled customers about investment risk and overcharged for some financial products. Regulators said Citibank also went beyond the scope of its banking license by brokering real estate and art deals for its rich clients - activities not allowed under Japanese banking laws.

The NASD specifics: Citigroup distributed misleading sales literature for hedge funds. The bank failed to properly describe the risk of investing in them while presenting rosy scenarios for likely returns, NASD said, adding that the sales documents also exaggerated the performance of the schemes.

Update of October 25, 2004: In its second timely filing opposing Citigroup's proposal to buy First American Bank in Texas, ICP has documented the two's funding of pawnshops and check cashiers, including College Station Pawn & Cash Station Jewelry and Loan, Q-Pawn, Inc., Decker Prairie Pawn, Inc., Zerega Check Cashing Corp., Montgomery Check Cashing Corp. of 403 East Third Street, Mount Vernon, NY; Castle Check Cashing Corp., continued in 2002; City Check Cashing of Jersey City, NJ; and Rite Check Cashing Inc. and G&R Check Cashing Corp. of New York. And what, after delay, will Citigroup say?

Update of October 18, 2004: On October 14, ICP/Fair Finance Watch received a letter from Citigroup’s outside law firm, Skadden Arps. The letter recounted:

“Earlier this week, Citigroup’s offices at 425 Park Avenue suffered a fire. Mail to that address has been redirected, and consequently, Mr. Howard has yet to receive the original [ICP] letter. The October 6^th Letter was carbon copied to Stacie E. McGinn who is no longer with our law firm. The letter was received by our law firm on October 12 and redirected to my attention yesterday. I have forwarded a copy of the letter to Mr. Howard. In the October 6^th Letter, the FRBNY indicates that if Citigroup intends to respond to ICP’s comments, it should do so within eight business days of the date of the letter... Citigroup intends to respond to ICP’s comments and hereby requests an extension of time to respond until October 25, 2004”--

Which just happens to be the day on which the comment period is slated to expire... ICP has responded. [And see above.]

Update of October 11, 2004: "http://www.innercitypress.org/frreport.html" chairman Greenspan, in meeting on October 1 with select members of the Financial Roundtable, was face-to-face with Citigroup’s Bob Willumstad. ICP’s timely comments to the Fed on Citis pending application to buy First American Bank include Willumstad’s response to ICP’s questions about CitiFinancial’s standards overseas. ICP has asked the Fed to nail this question down. Citigroup, meanwhile, has yet to respond in any way to ICP’s comments. Citigroup likes to ignore the Fed’s rules about responding in eight days, and only make a submission after the comment period closes [And see October 18 Update, above].

Update of October 4, 2004: On October 4, ICP/Fair Finance Watch filed two 21-page comments opposing Citigroup’s applications to acquire First American Bank, with the Federal Reserve and OCC. Click "http://www.innercitypress.org/citifile.html" to view.

Update of September 27, 2004: From Business Week of Sept. 24: “By Prince's own measure, he is failing. The bank is harvesting negative headlines galore and has regulators on its back on three continents. On Aug. 18, the British Financial Services Authority launched a formal investigation into the London bond coup. And Citi -- though it won't say who authorized the trades -- apologized for what had happened and promised not to repeat the behavior.” Haven’t we heard that before?

This week, we’d be remiss not to note the publication of a much-needed, straight-forward book on predatory lending, Rich Lord’s “American Nightmare.” In nine chapters and an appendix of questions that consumers should ask lenders, Lord surveys the field, from Pittsburgh to Wall Street, from brokers to services to lobbyists and beyond. Along the way he notes the work of non-profits in the trenches. From the Pittsburgh Community Reinvestment Group to Self-Help, from ACORN to Sunflower Community Action of Wichita, Lord profiles organizations and their campaigns. (A cynic might note that this is not a bad beginning of a marketing strategy, either.) One critique -- because there must be at least one, right? -- is that punches get pulled. Lord shows, for example, that the two settlements of HSBC’s Household have not even slowed the company’s foreclosure rate. Still the second settler, which last week "http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20040920005453&newsLang=en" CitiFinancial as well, is immune from Lord’s otherwise-trenchant analysis. (The same cynic might question whether this is a matter of politeness, or a marketing-related desire not to step on the toes of the field’s elephant.) But that’s quibbling! The book describes in novelistic detail the lives, both financial and emotional, of the people known as subprime. Here are two CitiFinancial victims:

“Mike and Ellen Papuga had tried for years to make a baby, but it just wasn’t happening... Then, in 1997, the apartment they were living in caught fire, and many of their belongings went up in smoke... The fire led to some financial and credit problems... So they went to CitiFinancial... The transaction reflected one of Sandy Weill’s mantras: cross-selling... In 2003, a miracle occurred: As her 40^th birthday approached, Ellen became pregnant... They wondered why nobody at CitiFinancial had through to remind them of the [insurance] policy... Even though Triton is a Citigroup subsidiary, the collection staff claimed they had no information about the insurance policy.”

And so it goes... Two points of full disclosure: ICP is covered in the book, including the questioning of Citigroup’s Robert Rubin, pages 106-7, and ongoing campaign against Citi’s and HSBC’s export of predatory lending, pages 59-62. Also, Lord "http://www.pittsburghcitypaper.ws/scripts/printIt.cfm?ref=1199" "http://www.innercitypress.org/predatorybender1.html" (click "http://www.pittsburghcitypaper.ws/scripts/printIt.cfm?ref=1199" for the review). Since he noted that book’s first edition’s typos, here’s a petty tit-for-tat: the executive director of CRA-NC is not Jeff but Peter. Don’t rob Peter to pay... Jeff? Nor, we can’t resist, last week’s praiser of CitiFinancial. This is a book that Citi-watchers will want to read...

Last week, ICP/FFW filed comments based on the Senate Riggs Bank report’s findings regarding HSBC and Santander, click "http://www.theherald.co.uk/business/24582.html" for article in the Glasgow Herald, reporting that “A US-based human rights group has written to Britain's financial regulator urging it to halt Santander's £8bn acquisition of Abbey National until it fully investigates its part in the alleged "violation" of US money laundering laws.Inner City Press and its Fair Finance Watch, based in New York, has drawn the Financial Services Authority's attention to the US Senate's recent report on Riggs Bank's alleged money laundering for former Chilean dictator Augusto Pinochet, and the dictator of Equatorial Guinea;” click "http://www.innercitypress.org/finwatch.html" for more.

Update of September 21, 2004, 5:55 p.m. -- It has just been confirmed that in the mortgage program Citigroup announced on Sept. 20, $3000 in closing cost assistance will be given, and no social security numbers will be required. While Inner City Press had heard this, on Sept. 21 it contacted the Citigroup spokesman listed on the press release; he cordially looked into it, and just after close of business confirmed the two above-recited elements of the program. Neither was disclosed in the "http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20040920005453&newsLang=en". While the reasons for omission might seem obvious, and while one might well agree with at least one of the reasons (ICP’s on record advocating for immigrants’ rights), the silence is strange behavior for the world’s largest bank, disseminating paid praise on a day it was otherwise slammed. In a sense, we ask these questions and report the results at the behest of our readers. A sample, from the mailbag:

Subj: ACORN and Citi?
Date: 9/21/2004 10:23:16 AM Eastern Standard Time
From: [Name withheld]
To: info [at] innercitypress.org

I'm very shocked to have just learned that Acorn joined with Citibank. Is Acorn selling out? Did Citibank really clean up its act? I'm confused by all this. Have you tried contacting Acorn to see what they have to say about all this? I guess you will post any new info on the site.

The answer to the second question, "did Citibank really clean up its act," is no, contrary tothe press releases. No overall dollar value for the partnership was given, by either party; whether the “best practices” paraded in the release apply to CitiFinancial in, for example, Puerto Rico (which Citi recently bought a subprime mortgage lender named “Easy Money,” see Report of Sept. 6, below), or Ireland, where CitiFinancial has been found to have the highest interest rates, see penultimate report, remains to be seen. One wag noted the ironic contrast between the press released-program and not only CitiFinancial's practices in the U.S., but with CitiFinancial being an entirely unreformed predatory lender in the countries of orgin of immigrants to the U.S.. As the ICP reader quoted above put it, it's confusing. One certainty among others: when a trillion dollar bank is essentially making and dictating public policy (as it did with the Gramm-Leach-Bliley Act), and buying allies for that purpose (natch), watch out, scrutiny is needed. These additional questions, ICP’s been told, will be answered. Meanwhile, Citi on Sept. 20 submitted its application for its proposed Texas acquisition to the Office of the Comptroller of the Currency. Developing... Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of Sept. 20, 2004, 1 p.m. -- Well, Citigroup at 7 a.m. on September 20 put out its "http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20040920005453&newsLang=en". Citigroup's paid partner does not even mention that Citigroup and its subprime CitiFinancial continue with mandatory arbitration, which the group has diagnosed as a predatory practice. So: a partnership with a predator? Citigroup's press contact on the release is Rob Julavits, until recently a reporter (on Citigroup) at the American Banker newspaper... At 1 p.m. on September 20, Mr. Julavits was not answering his phone: he was en route to Citigroup's "event" / announcement, on the 14th floor of Citigroup Center. Subsequently, three questions have been asked, the answers to which will be reported in this space. Until then, for or with more information, "http://www.innercitypress.org/contact.html".

Update of September 20, 2004: Regarding today’s Orwellian announcement, see ICP’s Reports of Sept. 16 and 17, below -- and note that Citi’s partner today has criticized other lenders for using mandatory arbitration, in "http://financialservices.house.gov/banking/52400wal.htm" (“Lenders should not be curtailing borrowers’ access to appropriate legal remedies when the lender breaks the law”) and "http://banking.senate.gov/01_07hrg/072701/shea.htm", in its recent "http://releases.usnewswire.com/GetRelease.asp?id=117-06282004"; its putative head has "http://www.acorn.org/index.php?id=925", in a "http://www.acorn.org/index.php?id=925" that "these mandatory arbitration clauses are meant to allow the company to escape the consequences of making illegal and abusive loans.” Yeah, exactly -- including as to CitiFinancial...

Citi’s sleaze is also overseas. The Irish Independent of September 17 reports on a survey by the Irish Financial Services Regulatory Authority, comparing the costs of borrowing over different terms and is based on the main lenders in the Irish market. “The same loan at a variable rate of interest will cost Euro 2,748.60 at the Ulster Bank but only Euro 2,338.40 at Permanent TSB. But it was CitiFinancial, a UK lender operating at the higher risk end of the borrowing market, that charged the highest rates. On a Euro 10,000 variable rate five-year loan, CitiFinancial charged a whopping Euro 6,471 over the life of the loan - Euro 4,420 more than the total credit charged by Tesco.”

And the sleaze, beyond subprime lending, is recognized: in Japan on September 17, financial authorities ordered Citigroup Inc. to suspend its private-banking operations, in one of the harshest penalties ever handed down against a bank in Japan. The Financial Services Agency on Friday it would revoke subsidiary Citibank N.A.'s effective license to serve high net-worth customers. In a strongly worded statement, the financial regulatory body criticized the unit for not having properly functioning internal controls, adding that it found a long list of "serious violations of laws and regulations" and "extremely inappropriate transactions." Just like CitiFinancial!

Update of September 17, 2004: A bit more detail has emerged. Alongside the below-referenced endorsement of CitiFinancial’s claimed reforms (limited, it appears, only to CitiFinancial’s mortgage lending, and decidedly silent on Citigroup’s planned continued use of mandatory arbitration), Citigroup on September 20 will be announcing a mortgage lending program that will be related to immigration issues. It might be fine product; it does not change or mitigate the harm that CitiFinancial continues to cause in low-income communities of color, including those with significant immigrant populations... For or with more information, "http://www.innercitypress.org/contact.html".

Interim update of September 16, 2004: We'd be remiss not to report the rumblings that Citigroup intends to announce, on Monday September 20, its praise by (or purchasing of, as some wags put it) a nationwide organization, which has already delivered such praise to "http://www.innercitypress.org/hsbc.html" (in a process that began in conjunction with HSBC's purchase of both Household and its critics). Even some of the settlement-professional who praised and/or participated in the Household settlement are expressing dismay at the slated announcement regarding Citigroup.Developing...

Update of September 13, 2004: Citigroup’s compliance problems are global: last week the head of Japan's Financial Services Agency Hirofumi Gomi acknowledged the media reports saying the financial watchdog is poised to (lightly) punish the Japanese branch of Citibank for alleged crimes: that is, for selling products that are banned under Japan's Banking Law. The agency may order Citibank to suspend part of its operations in Japan, including private banking services for wealthy customers, Kyodo News reported. "What I can say now is that we inspected Citibank between November and April and issued results" to the bank in late May, Gomi said. The FSA is likely to decide on specific administration measures against the bank by the end of September. In June, the agency ordered Citibank's Japanese branch to improve control over customer information after revelations it lost backup data on transactions. For or with more information, "http://www.innercitypress.org/contact.html".

Update of September 6, 2004: What's in a name? Citigroup's new purchase on Puerto Rico, a subprime lender, is named "Easy Money." It comes with six offices, to add to the six branches from which CitiFinancial is already robbing people on La Isla del Encanto; CitiFinancial plans to open three more this year, and ten in 2005... Sin verguenza is the word: shameless.

Update of August 30, 2004: at Citigroup, there's no wall between banking and predatory lending. And the whole team gets involved. For example, on Citi's Texas deal last week, the press release quote from the Bob Willumstad; Marge Magner spun the FT, and another a main spokesman was Ajay Banga, previous spinner for CitiFinancial (now that job's gone to an just-retired reporter, Rob Julavits, see below). Banga, who admitted that CitiFinancial sold insurance on fishing rods on which it never foreclosed, told the American Banker that "We don't have to be in every state, but we do have to be in the more critical ones." The deal is scheduled to be completed in the first quarter, after which Citi would build more branches in Texas or seek further acquisitions, Banga told the American Banker -- which misreported that "Dallas is the headquarters of the consumer finance business, CitiFinancial." Uh, that'd be Baltimore, to which Sandy, Bob W, Marge M. and even Jaime went in the Eighties, and cut a Faustian deal... Thought CitiFinancial did announce some 116 layoffs in Hanover, Maryland last week, while keeping its skeezy subsidiary Chesapeake Appraisal and Settlement Services in Columbia, MD... The spokesman for this layoff announcement? Ex-American Banker reporter Robert Julavits. "It is an effort to maximize efficiencies and leverage our resources in technology," said spokesman Robert Julavits. There ought to be anti-revolving door provisions between industry and the supposedly independent press, as well.. An anecdote: when CitiFinancial was acquiring Washington Mutual Finance Group, but leaving behind its Mississippi offices, ICP explained the scam to Mr. Julavits, and to reporters in Seattle. The latter covered the scam, but Robby the J didn't. And now...

Stray Citi squib of the week: "http://savannahnow.com/stories/082304/2391737.shtml" from Savannah, CitiFinancial's shenanigans in bankruptcy court...

Update of August 23, 2004: Citi last week bought servicing of $10 billion of Hibernia’s mortgages; eighty jobs will be eliminated.... Last week regulators throughout Europe announced an investigation of Citigroup’s bond trading there... Not to worry: Citigroup is a top-ten funder of both Republican and Democrats: fundamentally amoral, or meta-political, desiring access whoever wins. Seen at the DNC in Boston was Citigroup’s Robert Rubin, strategically placed in the quasi-royal box to ensure "chatter" (to use a word that’s that lately been shifted from Al Qaeda to demonstrators, see below) that Rubin might, just might, become the chairman of the Federal Reserve if the Democrats win. So either way, bankers will rule. Surprised? We aren’t. We’re just outraged. Call it the (real) Predators’ Ball...

Update of August 16, 2004: On August 10, another boot dropped: Citigroup announced that among the result of its acquisition of Sears' credit cards will be the laying-off of 450 employees, and the closure of a credit customer service center in Iowa. This follows other closures from Ohio to Idaho, and 105 earlier Iowa lay-offs by Citigroup. Citi spokeswoman Janis Tarter said, somehow with a straight face, that the purpose of these 450 lay-offs is to "maintain the highest level of service to customers." Meanwhile, last month, Sir Deryck Maughan, the chairman of Citigroup International, also talked about internal growth but acknowledged that over the next six years 20% of the company's growth abroad would come from acquisitions. The goal is to raise the international units' contribution to earnings to 50% from 37%, he said. International consumer operations are targeted to account for two-thirds of this growth. Boosting the consumer business "will require an acquisition to get to scale," he told analysts. "Which target, what we're going to pay, and when is to be determined."

Uh oh... Subprime will take you everywhere: in Taipei, Taiwan, on August 30 Citigroup "will celebrate four decades of island banking with a reception at the Grand Hotel. Company dignitaries who will be there include Marge Magner, Chairman & CEO of the Global Consumer Group" -- previously, trainer of CitiFinancial subprime branch managers at the Baltimore "campus," where her speech droned on through a World Series baseball game, which many (still, and gone) branch managers still groan about... But in Taipei, "there will be entertainment from well-known singer Tsai Chin who will sing hits from the 60s to 90s, a lion dance and other cultural events and a slide show and photo exhibit along with speeches." (Quotes are from the China Post of August 13).

Update of August 9, 2004: This week, while our "http://www.fairfinancewatch.org/enforce.html" is ongoing, it's back to the mailbag:

Subj: citifinancial predatory lending
Date: 8/6/04 1:25:17 PM Eastern Daylight Time
From: [ ]
To: CitiWatch [at] innercitypress.org

i have been on both sides on the lending game. i was in the consumer finance business for 16 years. i am also a current customer of citifinancial. i was informed recently that my "consumer loan" that originated in 2002 was an interest bearing loan. this loan is secured by an auto. i was not told this at loan closing, nor would i have agreed to this had i known. the young and dumb manager informed me that i was given this information at loan closing, at which point she was a secretary, but she remembers that day two years prior when her manager closed the loan. i am furious .. talk about predatory lending...

Yep.. For or with more information, "http://www.innercitypress.org/contact.html".

Update of August 2, 2004: Despite its politics, we don’t deny that the Wall Street Journal usually includes in its reported stories facts not elsewhere available. We say "usually," because the Journal’s July 27 front page article about Citigroup "goes downmarket" in Mexico, even "competing with loan sharks," amazingly did not even mention CitiFinancial, which is a major engine in Citigroup’s downmarket aspirations all over the world. (The article also barely mentioned Citi’s interest rates). The article compares today’s Citigroup to the Citibank of previous decades. The comparison ignores that Sandy Weill’s Travelers Group, founded on the subprime lender Commercial Credit now known as CitiFinancial, bought the old Citibank and irrevocably changed it. A shady subprime lender bought the biggest bank, and now goes subprime all over the world. When even the Journal misses this part of the story, it makes you wonder... Speaking of Sandy Weill, the bonus Citi’s board awarded him last year, $29 million, was the largest in the country (and world)... Who was it, again, who was at the helm when Citi ran up its liabilities re WorldCom, Enron and predatory lending? And now (8/1), Citigroup is named as an "iconic" target. It's certainly not ironic...

Update of July 26, 2004: Of Citigroup’s set-aside of $2.65 billion for (some of) its misdeeds with WorldCom, Chuck O. Prince said last week, "While it feels bad to have to pay out dollars of that magnitude, it feels very good to clear the decks and to put those issues behind." That feeling’s become addictive and routine for the world’s largest bank, often for smaller sums of money (though the deck is often repopulated). Consider for example the FTC and private firm settlement with CitiFinancial, which didn’t stop predatory lending, or even include any injunctive relief or reforms -- contrary to the Federal Reserve’s later finding in May 2004 that predatory practices continued... Meanwhile, Citigroup is rumored to be one of the two main hunters seeking to acquire Cendant Mortgage Corporation...

Update of July 19, 2004: The spinning never stops. On July 16, Citigroup's Bob Willumstad was in Upper Manhattan, with an oversized check for $900,000, ostensibly for financial literacy. The receiving organization, without mention that CitiFinancial was charged with predatory lending by both the Federal Trade Commission and, less than two months ago, by the Federal Reserve Board, lavishly praised Citigroup, including in a op-ed disseminated over the Copley News Service. Its affiliates in five other cities issued identical press releases praising Citigroup. One wag questioned whether this financial literacy partnership will include objective presentations about the costs of credit insurance (of the type CitiFinancial still hard-sells), about the dangers of being talked into converting unsecured debt, including retail installment contracts, into home-secured debt, the type of "sale finance conversion" that CitiFinancial urges all of its offices to do. For now, as a matter of financial literacy, any and all of Citigroup's potential partners or "students" should at least look at the Federal Reserve's May 2004 predatory lending cease-and-desist order about CitiFinancial, "http://www.federalreserve.gov/boarddocs/press/enforcement/2004/20040527/default.htm".

Update of July 12, 2004: CitiFinancial takes predatory lending global -- from the Western Mail of July 8 reports that "A loans company has agreed to redeem a couple's mortgage after an appalling catalogue of errors that included threatening them with having their home repossessed.: CitiFinancial says sorry: Last night a spokesman for CitiFinancial offered Mr. Mullan an unreserved apology and said that in view of the errors that occurred, the company would immediately redeem the mortgage. The spokesman said, 'We do have serious concerns about the way this case has been handled, and in the circumstances believe the right thing to do is to redeem the mortgage.'"

On the lay-off front, Citi is slashing 400 jobs in Des Moines, Iowa, and in Overland Park, Kansas, and Columbia, Maryland, it’s eliminating another 160 jobs.

Update of July 5, 2004: In "Fed Fines Citigroup for Abuses," in July's Origination News, a pro-subprime lawyer from Kirkpatrick & Lockhart is quoted that the settlement "definitely addresses asset-based lending... I have never heard of a settlement where the lender is required to release the security interest on the loan." One advocate was quoted with qualified praise of CitiFinancial, stating that it has "definitely improved." We dispute that -- the abuses have been shifted from high-profile issues like single premium credit insurance (and the even-longer clung-to personal property insurance, on fishing rods, ice chests, etc, see below in this Report) to other aspects... The same Kirkpatrick & Lockhart lawyer is quoted that "It is certainly my sense that it was in large part because the Fed felt it had been misled and they are just not going to put up with that... A $70 million penalty is a big hit." But it's not a big hit, to a $1 trillion bank... Meanwhile, it's now rumored that Citigroup is in the run to acquire New York Community Bancorp and its 141 branches. Developing..

Update of June 28, 2004: Turns out that CitiMortgage, and not just CitiFinancial, is doing subprime loans. CitiMortgage in St. Louis has "http://cj.careercast.com/texis/jobsearch/details.html?id=40cfebd96d6039&q=subprime&qField=All&pp=25&view=1&page=1" an advertisement trying to hire a " Risk Management Analyst" to be "responsible for analyzing potential sale opportunities of subprime whole loans." Who knew? Citi usually claims that its subprime loans are only made through CitiFinancial...

From subprime to China: Citigroup has suspended two of its senior China bankers, including the high-profile Margaret Ren, in a move that raises questions about the U.S. investment bank's interests in the China issuance market. On June 24, Citigroup spokeswoman Katherine D'Arcy confirmed the contents of an internal company memo that said the New York-based financial-services giant had suspended Ren, daughter-in-law of former Chinese premier Zhao Ziyang and the vice chairman of Citigroup's China investment banking operations, and Earl Yen, director of China investment banking. "With regret, after a careful and thorough review, we have suspended Margaret Ren and Earl Yen,'' Citigroup said in an internal memo sent to senior management on June 23. "The conduct for which they were suspended, which did not involve client matters, related to the presentation of false information to the company and its regulators,'' the memo said. Lying to regulators -- it seems to be common throughout Citigroup's regions and lines of business..

Update of June 21, 2004: Ten days after announcement of the Federal Reserve's settlement on the cheap ($70 million) of predatory lending charges against Citigroup, Cit's sent out a letter announce their hiring of one Eric Eve, previously "special assistant for political affairs for President Clinton," as head of "community relations." Well, Citigroup sent down to South Carolina one of Clinton's lawyers in the Paula Jones case, Mitch Ettinger, to intimidate CitiFinancial's own ex-employees... Intimidation, retaliation and schmoozing appear to be the job description, not reform. But we'll see... Beyond revolving door, there's deep political connections, to Buffalo assemblyman (and deputy Assembly speaker) Arthur Eve, and Sen. H. Clinton counsel Leecia Eve, whose position Eric E. alerted Leecia E. to, according to the Buffalo News of Feb. 23, 2001. This is how Citigroup tries to not only cover its sins, but allow the predatory lending to keep on keepin' on. Here's another letter, from another (new) source:

Subj: CitiFinancial

Date: 6/16/04 12:57:39 PM Eastern Daylight Time

From: [ ]

To: CitiWatch [at] innercitypress.org

Keep up the good work of exposing CitiFinancial. I worked for CitiFinancial for 8 years. I was a manager for almost 3 years. I hate CitiFinancial. The pressure put on the employees is unbelievable.... The advertising is very deceptive to customers. Employees are trained to avoid disclosing the excessive interest rates as best they can. Employees are also trained to sell the high priced useless insurance such as credit life, credit disability, involuntary unemployment and personal property. It is ridiculous how much insurance premiums can be added to a loan... Upper management puts soooooo much pressure on branch managers and branch employees. They use intimidation and love to embarrass you in meetings. I worked in several offices and almost every employee in every office feels the same way I do. I assure you, at least 90% of the employees would leave CitiFinancial if they could, and many do -- they have a very high turnover rate.

Another thing among several others, regarding employee overtime. Upper managers want it both ways. They want employees to work a lot of overtime hours but sure don't want to have to pay them for it. I heard a district manager praising an employee one time because the employee worked a lot of overtime but never included it on her time card. The DM said "that's the kind of employee I want". It happens ALL THE TIME! Employees working overtime but they know they better not claim it on their timecard if they know what's best for them. They know if they claim overtime they will face the WRATH of their Regional Manager. Employees know they better not get on their supervisors bad list.

ICP note: including by whistle-blowing...

Update of June 14, 2004: Now that even the FDIC has acknowledged a need to protect consumer information during outsourcing of the kind engaged in by Citigroup, U.S. regulators including the Federal Reserve just might want to pay attention to Japan's Financial Services Agency's recent finding that Citigroup "lost data" on 123,690 banking, credit card and investment transactions during shipment to the bank's Singapore data center. On June 11, the FSA in Tokyo criticized Citigroup for having taken a full month to even inform customers of the data loss; the report requested by the FSA on the problem was about a month late, and Citigroup's Singapore branch took six days to inform the Japanese unit of the loss. Hey -- at CitiFinancial in Tennessee (and elsewhere), they just shred the information, before the Fed's examiners show up...

Some more insight into CitiFinancial, from (among our favorite) sources:

Subj: Everything you always wanted to know about credit insurance but was afraid to ask

Date: 6/8/04 3:02:08 PM Eastern Daylight Time

From: [Long Time District Manager] To: CitiWatch [at] innercitypress.org

Re: ICP's pressure to revise Citi's personal property insurance sales. I followed this closely. It was awfully embarrassing to ask for fishing tackle, bug zappers (literally), and ice chests as security. Bravo to ICP!

...As far as the ancillary products, we sold Home and Auto (an over inflated auto club program that included additional warranties on major home appliances, emergency room/ambulance reimbursements, support to initiate neighborhood watch programs, child registry, etc. Really not a lot to do with respect to a personal or home equity loan. We sold them in 1, 3, 5 & 10 year policies at premiums of from $249 to $1749. The approach we took to selling these was to sell three year or less policies on our personal loans, and 5 year or more policies on anything that was secured on real estate...

ROCopoly.... In order to qualify, the branch team had to score QUICPlan (Quarterly Incentive) points. These were accumulated based upon growth (in the personal and real estate loan portfolios), delinquency (30 day personal loan, 60 day personal loan, 60 day real estate, and 60 day sales finance), and insurance sales (personal loan $/K, Equity Plus $/K, real estate premium/loan, and non-credit premium/loan). Then there were the various ROCopoly categories: SFCs (which had a per person pay out based upon the 5-age of the baseline converted), PB renewals (calculated as the SFCs were), Home and Auto (paid out on a pool basis - and yes this would be divided among the branch team), Equity Plus and then Real Estate.

You referenced a DM to BM memo (that frankly sounded all too familiar) whereby the DM states that "...where credit approval exceeds...authority...refer to [me]...if it qualifies for Equity plus...(s)he should find notes ...reflecting that conversation..." The notes would ideally be placed in the MAESTRO system, although it is possible that these notes would just be hand written on the Pricing Exception Request form. Normally, these pricing exceptions had to go higher than the DM up the chain of command. If the branch and the DM could not overcome the customers objections to a 24.99% - 27.99% rate, you had to seek an approval to the exception request. There was always mass confusion on what we were to offer those customers who received a particular direct mail piece. It involved double speak from Clements (for over two years he adamantly stated that the branches were to charge the noted rate (18.99%) on the mail piece, and declared he would defend any branch cited for doing so by audit, and then he would alter this claim refuting he had ever stated such, and with equal adamancy declare that the branch that did not price at the required pricing was out of compliance and deserved an audit citation. Exceptions were sought by indicating that you had attempted to sell a real estate secured loan at a much lower rate (from 8% to some 18.99% depending on the qualifying demographics such as equity position, credit, and ability to pay...

You asked about the discretion allowed to BMs in their quest to secure sales finance dealers. We were instructed to source dealers with a higher probability of home owners as customer: carpet, home improvement, higher end furniture stores. The BM was supposed to source this business, but the company also has people in place whose responsibility is to just source corporate accounts. In terms of measuring the number of home owners: the results are tracked from the time that the first sales contract is purchased. Every dealer had its own report showing what the home ownership status was, how much equity was in the home, what the high credit might be for that individual, and if you coupled that report with another branch/district report the delinquency status of that customer could also be tracked, as could the yield on his sales account...

One more item. Thought you might want to understand the insurance penetration formula. On ROC (manager yearly bonus program) and ROCOpoloy (employee monthly bonus program) points were gained towards bonuses based on the "dollars per thousand" method. For example: sell a single life premium of $250 and the total of payments on the loan is $5000 you divide $250 by $5000 and multiply times 100. This gives you $50 per thousand for the bonus program. As you can see, by simply selling life insurance only, you won't even qualify. Thus the pressure to sell. They have a similar method for monthly premium real estate loans too. Don't let the "customer first" thing fool you, its still required that you sell insurance. If you don't, you don't get paid bonuses!

On CNNfn's Money Gang last week (6/8), Farrell said what "bothers me about Citigroup is the executive compensation. Mr. Weil retired last year and he got like $38 million or $40 million as a going away present and Mr. Prince that came in, he was a chairman for brief period, got like $29 million. And Robert Rubin , who I think is one of the great people in finance." KIERNAN: But he hasn't been with the company for all that long. FARRELL: Well, he has one direct report, which I think is his secretary. He gets paid something like $15 million. And that bothers me that there's this pay scale that exists. ICP note: particularly at a predatory lender...

Update of June 7, 2004: This week, in continuing whistleblowers' analysis of the Federal Reserve's half-way measures with CitiFinancial, we have dueling (interacting) messages, from "13 year branch manager" and "long-time district manager" (who we'll call "LTDM"). In reverse order:

Subj: Consumer Appreciation Days [at CitiFinancial]

Date: 6/1/04 10:05:43 AM Eastern Daylight Time

From: ["LTDM"]

To: CitiWatch [at] innercitypress.org

Just read the excerpt from the 13-year manager re: CAD (Customer Appreciation Days). This is one of those events that I was going to allude to down the road. This manager is right on in his/her assessment. It's a program that has gone on for years. At one time it lasted from 3 days to a week during the months of May and November. It has since become a two week stint. Honestly, we drove it like hell! Recognition for a successful CAD month was EXTREMELY HIGH! We expected branches to write 100 loans during a week's period of time.. and yes, God help the manager whose area didn't have substantial growth after a week of this type of production! Usually they did, but occasionally there were those areas that kept the brow beatings at bay by simply "re-writing balances only" (just a straight refinance of an account with nominal cash advance). The loans were not supposed to simply help the customer w/a refinanced loan at a lower payment, the loan was to increase the amount owed by the borrower, increase the security (collateral) position, and provide further "protection" on the loan.

"Protection" was the safe means to refer to credit and ancillary insurance products. We coached to offer protection, not credit insurance - ever. Thirty percent of a branch's profit is attributed to the sales of insurance products. In fact, from the credit insurance premiums that a branch sold, they received 35% commission if Accident & Health or Involuntary Unemployment Insurance, and 30% commission if for credit life insurance. All of the ancillary products - which included something called Home and Auto - are worth 40% commission back to the branch. Every branch, as well as every employee is required to track their results. Regardless of the staff position, every one is held accountable to produce at acceptable levels. This is not measured simply by the dollar amount of premium sold, either. For instance, it is possible for an employee to sell as much as $20,000 insurance premiums on a $120,000 loan. The $20,000 premium may satisfy that employee's premium goal but that was never regarded as sufficient measure! Insurance sales were tracked on "dollar per thousand" , or "dollar per hundred". This was a method whereby the amount of premium was measured against the total loan volume (or in the case of personal loans, it was measured against the "total of payments"), in order to keep track of the percentage of premium sales. Normally every insurance product that was sold was tracked on an individual employee basis: credit life, credit disability (accident and health), credit involuntary unemployment, and the various ancillary products.

As for SFC's...these are those accounts generated from a retail sales contract that was opened to finance a customer's purchase from a community business (furniture, appliances, home improvement items). In order to appeal to the business owner, Citi offered great programs such as 90-, 120-, even 360-day same-as-cash, or no interest etc., at very reasonable interest rates as low as 16.99% to 24.99% depending upon the quality of business that the business can generate. As these contracts are purchased into the branches, it is the responsibility of the branch team to "convert" them into personal, Equity Plus, or real estate loans. The SFC program was tracked as intensely as the insurance sales were. And again, certain rules applied to ensure growth to the branch: there had to be a $500 advance on these loans in order to get ROC-opoly credit. Huge audit violation to payoff a deferred program sales finance account, but everything else had to be converted because no income is credited to the branch from the existence of sale finance accounts. On any branch-, district-, state- (any level really) Goal Report, or ROC Report as it came to be known, you could see the profit margin that was possible given the sales finance base, but the next line to the report subtracted out that income. The income went somewhere (!), but the branches were not entitled to include it in the Funny Money known as the ROC Report (which ultimately lead to what was then annual bonuses of up to a full year salary for some branch managers!), or ROCopoly. (I guess that's some of the profit that allows Citi to buy out restitution programs when they really screw up!)

LTDM added:

Subj: Re: CAD

Date: 6/1/04 10:39:31 PM Eastern Daylight Time

From: ["LTDM"]

To: CitiWatch [at] innercitypress.org

... Every time that we would merge with or acquire another faction, I always pitied the poor bastards for the integration process that we would require. It was always a big deal when we merged with or acquired another group, to run a huge solicitation program of some kind or another. The idea was that we would host a "grand re-opening" by acquainting our new customer base to CitiFinancial. That's probably why the "13 year manager" from whom you recently received correspondence is feeling so much pressure. Besides CAD being CAD, there's the additional expectations of what the new WaMu branches can provide, and if they are not doing so, how the existing Citi branch managers can set the tone for them...

"Making Payoffs difficult" -- We had a whole program - "Save a Payoff"! My branches could not quote a payoff until they faxed me the demand, and I personally called the customer to find out what they were going to get in replacement of my Citi financing. I was to coach my branch managers that they have 28 days to get the payoff to the requesting party and if any one had any issues about this length of time required to respond that they should call the District Manager, myself. For awhile, we (District Managers) were instructed to have the customer call our Region Managers if we could not convince the customer to not pay off their account. Of course there was a two fold message to this: 1) the DM clearly did not have the capacity to bargain with the customer. 2) the DM needed to be humiliated by calling upon their RM for support. The response from the branches may, or may not have been that calculated. The work load in the branches is immense! So the fact that payoff demands are delayed may not always be at the DM/RM directive, it could also be that the branches are simply over burdened and are unable to respond to the request.

...The organization really needs to come down from the TOP. I have sat and dined at Chairman's Forum events with Sandy. What a pompous ass... He has his wife deliver PR to a eight person banquet table so he doesn't have to intermingle! I have observed Bill Clements make a fool of himself kissing K.C.'s ass during a manager's meeting. I have listened to Bill and his Region Managers discuss how they were going to "...piss [xxx] off to see how {he/she} responds" .... That is how Citi management operates.

Until another time....Regards!

And now, 13 Yearzo's most recent:

Subj: Re: Citifinancial practices- many thanks for your message; a few questions, a...

Date: 6/2/04 12:32:29 AM Eastern Daylight Time

From: ["13 year branch manager"]

To: CitiWatch [at] innercitypress.org

Here's my attempt to answer your questions... While "breaking delinquency" is a huge item at Citi, we wouldn't put deals into equity plus loans because it took too long with these disclosures. Sales conversions were not converted to break delinquency because we didn't have them as delinquent accounts in the branch. Sales were converted to equity loans for growth and profit. Personal loans were rewritten to make additional income and cure delinquency. Understand that Citi wants all accounts to be less than 30 days delinquent by the last working day of the month. Branch employees will do ANYTHING necessary to not carry an account delinquent. Rewrites, free deferments, payment manipulation, etc. Understand they MUST collect or move these accounts to prevent serious problems from supervision.

Hope this helps. Please keep my name confidential... But you can ask me questions anytime.

Oh, we will, we will...

Update of June 1, 2004: Below is ICP's analysis of the Federal Reserve's May 27 cease-and-desist enforcement action against CitiFinancial. Since then, the whistleblowing continues:

Subj: Citifinancial practices

Date: 5/29/04 6:11:28 PM Eastern Daylight Time

From: [13-year CitiFinancial branch manager]

To: CitiWatch [at] innercitypress.org

Just read your comments regarding the $70 million dollar Citifinancial settlement. I'll tell you, the pressure is on for managers and staff to book business with high balances at high rate to increase yields and profits. Take these two examples: Citifinancial has a bi-annual event they refer to as Customer Appreciation Days (CAD) in which they "thank" their customers by soliciting them to rewrite their personal loan with either no payment until July (event held in May) or Next Year! (November event). The idea here is to rewrite every customer, recharge them for insurance premiums and fees, and advance a small amount, say $500 or so in order to renew income and cure delinquency. They expect to add one month in productivity each time, thus getting 14 months production in 12.

Tracking by branch staff starts with calling customers and setting up appointments early in the month so to maximize the number of rewrites they can get. And, you are accountable for these results! Just another way to increase predatory lending income! (By the way, personal loans are rate structured to 27.99% on renters and 24.99% for homeowners, a rate exception is an audit exception and highly frowned upon by the company!)

As for the lawsuit issue, the pressure is on branch staff to "convert" as many sales accounts to loans as possible. Rocopoly tracks SFCs because the branches don't make any income from sales accounts. They must have a high rate loan to make any money at all. The loans in question were converted sales accounts, written on 90 day, 180 day or 360 day same as cash deals converted to 17.99%-21.99% second mortgage loans. They sometimes used a "blended rate" deal that started at 17-21% for 30 months then reduced to lower rates after that time. They advertised these loans at lower rates because they were "blended"...And the premiums for insurance on these deals were HUGE income for the branches!!!

Stay tuned, there is more. Customers have the "choice" of having a prepayment penalty on their first or second mortgage loans. The choice is whether to pay an additional 1/2 in APR to do it without! And they don't allow customers to refinance for lower rates without taking additional cash! Growth is such an important area to them they penalize customers who want to simply refinance at a lower rate, the same rate they may be offering to other customers with the same credit and loan to value ratio!

The Fed has their hands full if they want to dig a little bit more and tap some of the penalty income they can claim from this predatory lender! Regards -- 13 year branch manager

Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of May 28, 2004: Yesterday, the Federal Reserve announced a cease-and-desist enforcement action against Citigroup's subprime CitiFinancial unit, calling for $20 million in restitution, a $50 million fine, and some "remedial" actions -- including revising its conpensation structure and its practice of misleading examiners and destroying or hiding documents. See, e.g., ""http://www.baltimoresun.com/business/bal-bz.citi28may28,0,759985.story";" by Bill Atkinson, Baltimore Sun, May 28, 2004.

The practices the Fed describes in the order -- illegal requiring of co-applicants in order to sell more joint credit insurance, and shifting personal unsecured loan customers into high-cost mortgage loans -- are only a few of CitiFinancial's problematic and predatory practices, the tip of the proverbial iceberg. CitiFinancial's business model is based on the sale of credit insurance that is neither asked for by, nor in most cases beneficial to, the customer, and on "upselling" customers from unsecured to home-secured loans. During the "http://www.innercitypress.org/citical.html", ICP submitted to the Fed as Exhibit 7.1 a CitiFinancial insurance sales script, which under the heading "Questions to Ask During the Application" listed, as the first question, "Your wife / husband's name is? (Joint Loan)." The upselling was documented by a CitiFinancial program called "Upsell Challenge." For further and ongoing example, ICP has evidence that CitiFinancial pays its branch managers based on how many sales finance loans (for furniture, for example) are converted to more lucrative real estate-secured loans. It's called "Sales Finance Conversion," or SFC, in CitiFinancial's compensation scheme, called ROCO-poly.

Downplayed in the order, in Paragraph 14, is the Fed's requirement that CitiFinancial henceforth ensure "full and honest cooperation with regulatory authorities" and improve "document retention policies." The background to this is instructive:

While Citigroup was "http://www.innercitypress.org/citieab.html" in 2001, Inner City Press was contacted by CitiFinancial employees in South Carolina, who described how they were ordered and compensated to fool customers, with credit insurance and upselling to high-cost loans. ICP submitted these complaints to the Fed and to the press: the American Banker of July 10, 2001, quoted from "an affidavit taken Sunday by the community group Inner City Press/Community on the Move that CitiFinancial pressed customers to refinance loans at higher rates -- a practice known as flipping."

Soon thereafter, two of the CitiFinancial ex-employees who contacted ICP were threatened by Citigroup with being sued for violating a so-called "non-disparagement" clause they had signed. The clause, by its terms, prohibited the employees from describing, even to regulators, what they were paid to do at CitiFinancial. ICP provided copies of these gag orders to the Fed and to the press. The American Banker of July 30, 2001, reported that ICP

"has interviewed numerous former CitiFinancial employees [and] has alleged that several were told they had to sign nondisparagement agreements with the company as a condition for receiving their final paychecks. A copy of one such agreement, obtained by American Banker, bars the former employee from making 'any statements to any person regarding the company and its agents of a derogatory nature or which disparages the reputation, business, or integrity of the company or any of the executives or employees of the company.' It also contains a clause barring the former employee from disclosing the agreement."

Citigroup sent down to South Carolina a partner from its outside law firm. Reuters, in a July 27, 2001, article entitled "Citigroup Hires Lawyer in Loan Abuse Case" reported that Citigroup "impressed on former workers that Citigroup will enforce so-called non-disparagement clauses, which keep employees from making derogatory statements about the company, according to the person who was questioned by Ettinger's legal team and [ICP].... Citigroup spokeswoman Leah Johnson [said] 'Our severance agreements, like those of most companies, include a standard non-disparagement clause. Because of our desire to assure that our stringent standards of conduct are upheld, such clauses at CitiFinancial never apply to employees bringing any concerns about illegal or unethical activity they believe they have witnessed to the appropriate authorities inside and outside the company.''" The Fed conditioned its "http://www.innercitypress.org/citieab.html" approval on conducting an examination of CitiFinancial.

Before the Fed even got the CitiFinancial examination going, Citigroup applied to "http://www.innercitypress.org/citical.html". During this challenge, ICP was contacted by CitiFinancial whistleblowers in Tennessee and elsewhere. ICP submitted these complaints, and evidence, to the Fed, and soon the Federal Reserve Bank of New York sent two attorneys to Tennessee, to depose the CitiFinancial ex-employees who had contacted ICP, and others. The American Banker of October 11, 2002, reported

"In the interviews taking place this week in Tennessee, Fed officials will meet face to face with former CitiFinancial employees who had told Inner City Press of unethical sales practices... including how she was trained to cover a loan document with her forearm when filling it out, so the customer could not see portions. Shari Leventhal is the Fed attorney who was dispatched this week to Tennessee to conduct the inquiry, according to Inner City Press. A spokesman for the New York Fed confirmed that Ms. Leventhal was a counsel at the bank, but would not comment on her activities."

ICP was informed, by those deposed, that accompanying Ms. Leventhal were Yoon Hi Greene, Counsel, and Ms. Gretchen Downing, Bank Examiner, both of the FRBNY. ICP also reported to the Fed, and the above-named Fed employees were informed, that CitiFinancial offices removed and shredded documents. ICP named names, and locations: for example, that CitiFinancial District Manager Nancy Neel removed boxes of documents from CitiFinancial's Morristown TN office, took them to Jefferson City TN and shredded them. ICP reported this to the Fed, and directed the Fed to specific documents that remained unshredded (because whistleblowers had hidden them), in the Jefferson City office. ICP asked for copies of the deposition transcripts. The Fed refused to provide the transcripts, either to a (deposed) jocular ex-employee, or to ICP, including under the "http://www.innercitypress.org/foia.html".

Now, more than a year later, the Fed "http://www.federalreserve.gov/boarddocs/press/enforcement/2004/20040527/default.htm" Citigroup $70 million, while downplaying Citigroup's blatant attempts to conceal and destroy evidence, and to gag its own employees. WorldCom has cost Citigroup $2.6 billion (so far); apparently low income consumers are worth less than three percent of that.

CitiFinancial on May 27 tried to "spin" both the press and certain Citi-selected consumer advocates, claiming the problems are behind it, and stating that "only" 1900 customers are eligible for the HOEPA / high cost loan restitution, and 100,000 customers for the forced co-signed joint insurance. It's important to note that the practices alleged by the Fed were not limited to -- in fact, had nothing to do with -- the business Citigroup bought along with "http://www.innercitypress.org/citiafcc.html" in 2000. These were and are the practices of CitiFinancial, previously known as Commercial Credit, where all of Citigroup's senior executives worked (and designed these practices). Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of May 24, 2004: From last week's correspondent:

Subj: Re: citifinancial [Second dispatch]

To: CitiWatch [at] innercitypress.org

... Marge Magner was integral in training sessions, manager orientations, etc. And yes, there'd be plenty of times when she would facilitate the meeting as well. If not with the actual training materials, but with the evangelical punctuations that she, KC Mead, Bill Clements and Bill Starkey are famous for! I was there for 14 years., so I was in just as Marge was gaining a foothold to her status.. Believe me, every utterance in "rote" training programs were cleared by Marge... Willumstadt was very visible at annual meetings, "kick off meetings" of various kinds....However, he was never as outwardly, warmly endearing for the masses as was the outward facade of Marge, so he was not quite the PR figure that she was...

Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of May 17, 2004: Quite a week for Citigroup: paying off $2.65 billion, supposedly, to atone for its enabling of the WorldCom's fraud, then scooping up for $1.26 billion the mortgage business of Principal Financial (to, if the past is any guide, defraud or nickel and dime yet more consumers). Principal, we've heard, has faced numerous complaints about its servicing; there'll be more. We continue to receive information from those inside or who've just left the company, such as this, from a long-time CitiFinancial employee:

Subj: CitiFinancial
Date: 5/10/04 6:06:46 PM Eastern Daylight Time
From: [name withheld]
To: CitiWatch [at] innercitypress.org

I have been perusing your site for a couple of years. I worked for CitiFinancial for 14 years in a number of supervisory capacities... You are pretty much right on the money in assessing the problems at Citi, but there is so much more. You haven't tapped into the management style of the folks at CitiFinancial...that is where the real travesty lie. Upper management is riddled with phony evangelicals ("Do the right thing - first time, all the time.") the likes of Bill Clements, K.C. Mead, a "Managing Director" who was involved in the suicide of one of her region managers shortly after Citi acquired he and she from Transamerica. (Yes, there was a time when Citi was conducting a due diligence of that organization, too. That was just before Citi bought Sec Pac Finance - the financial services arm of BofA at the time.)... You also haven't dug as deeply as you can into the incentives at Citi - everything from the lucrative Chairman's Forum to the bonus structures to the means of promotions. Now, this company has once again bought themselves out of being held accountable - for a mere $2.65M. The dogma of "getting this behind us" is so resonant in my ears. Management touts this ability...don't believe for a moment that it's a lesson learned. It's just a very small fine to pay out of the huge Citi coffer that gets fatter & fatter everyday with the help of the products of the environment - as I myself once was.

We will have more from this correspondent...

Update of May 10, 2004: A Dow Jones headline from May 7, followed by an explanation. Citigroup's Banamex Targets 8M Homes Without Bank Accts - yep, targeting them with CitiFinancial, settler of predatory lending charges in the United States. Meanwhile, CitiFinancial has announced plans to open ten new offices in Hong Kong... COO Willumstad said, at the AGM on April 20, that the same practices apply outside the US as within. Well, the newspaper The Standard quotes CitiFinancial's Simon Chow that CitiFinancial's "average interest rate will be over 20 per cent annually."

Update of May 3, 2004: Citi and the predators -- it's not limited to mortgages, or even to CitiFinancial. A recent connection is Citi's decision to be underwriter and book runner for a major stock offering by Dollar Financial Group, another other things a nationwide check cashier (mostly under the Money Mart brand name), and a payday lender subject to class actions for usury. Dollar settled such a class action in California, in 2001. Doesn't bother Citigroup -- Dollar Financial's books are stored at Citigroup in the Brooklyn Army Terminal, 8th floor of 140 58th Street... The OCC has reached a formal finding that "Dollar Financial actively promotes loan rollovers, creating "a misuse of the loan product for long-term credit." Citigroup's lead bank is the OCC-supervised Citibank, N.A....

Update of April 26, 2004: It's a once-a-year event, so it will occupy this week's CitiWatch Report: the shareholders' meeting held April 20 at Carnegie Hall. Onstage was a table with three seats: Weill, Prince and Willumstad. Behind them a screen, on which a video would later be played. Weill began the meeting comparing Citi's performance to AIG, Berkshire Hathaway and GE. "If you have personal business," he said, "representatives of Smith Barney and others are in the back of the hall." Then he endeavored to move quickly through the agenda, almost closing discussion on Agenda Item One (election of directors) before any questions could be asked. A certain Ms. Davis, soon to depart for Stanford, Connecticut and Morgan Stanley's meeting, spoke at some length. [Just prior to Weill's kick-off, she accused ICP of misquoting her, without saying how or where; there will be no direct quotes from her in this report, since taping at the meeting at prohibited to everyone except Citi, which should we think provide copies.]

This question of directors had been big, in the run-up to the meeting, with even the New York Post running a headline, CAL-PERSONAL, reporting that Calpers would vote against Weill and Prince, the latter for conflict of interest. But there was very little debate at the meeting itself. ICP finally asked a question -- Weill demanded to know if it would relate to directors, it did: why should those who ran Commercial Credit and CitiFinancial, leading into the predatory lending settlement with the FTC, continue on the board? Why has director Robert Rubin claimed that this controversial subprime prime lending is not under his "aegis"? (See further below on this page: word search "aegis," we did). Why does CitiFinancial have not even purported "best practices," outside the U.S.? Weill asked Willumstad to answer; Willumstad said that he didn’t agree, that "we have retooled to the standards of our critics," then claimed that CitiFinancial has the same practices outside the U.S. as within. ICP asked, where do you suggest we go with the inconsistencies? Weill responded, Willumstad, and asked Rubin (seated in the front row) if he'd heard about aegis. We'll see.

There was some humor -- of Parmalat, for example, Prince groaned that to be defrauded by an Italian milk company was truly to be defrauded, indeed, to which another on the stage - Weill perhaps? We want the tape -- said, "It's powdered milk." Much was made of Citigroup's $100 billion of equity. A union presented a proposal that Citigroup at least better disclose its political campaign contributions; ICP supported it, noting Citi's lobbying against anti-predatory lending laws at the state and local levels. A video was shown, of Citi's $200 million financial education program, with talking head shots of all three on stage, only this time in a windowed office over Park Avenue. Rubin and Marge Magner were also interviewed. Among the project profiled was one in which a Russian banker -- to know who, we'll need the video of the meeting -- expressed gratitude for having been flown to the U.S. and put up for four weeks. Then it was open mike time, and time for another question: is flying for-profit Russian bankers around part of the financial education program? Prince deadpanned: if it's in the video, it's in the program. Okay then -- any reaction to JP Morgan Chase's $800 billion pledge, and BofA's $750 billion? Willumstad responded that those were done in the context of mergers, and that in Citi's last merger, Golden State, $175 billion was committed to those Golden states (Cali and Nevada). He said while Citi's number one or two in subprime, it's number five in prime mortgages. ICP's subprime question -- whether the financial education is tied in any way to the relatively lower income customers to whom CitiFinancial is directed -- was answered by Prince, who said "we accept that we need to be leaders... as noted, we were all at Commercial Credit since 1986," and more -- we'll need the tape. An ex-Primerica employee presented a symphony for the company (very surreal, that) -- Weill joked that the man had made it to Carnegie Hall with his music. It was very magnanimous, it was very self-satisfied, it was the world's largest bank, praising itself, in a concert hall named for a robber baron...

Update of April 19, 2004: Smug dinosaur, now under fire: Sandy Weill, speaking or rather pontificating April 14 in Ithaca, New York, at a love-fest at Cornell, said "I don't do e-mail and I think that turned out to be a good idea." Leave no paper trail: it's one of the prime techniques of, among others, predatory lenders. Power corrupts -- and makes blind. Weill also said, of Citi's many scandals and fines, "I don't know what I did wrong." Then he hasn't been paying attention; he hasn't been listening. Further efforts in that regard will be made this week [See Report of April 26].

Update of April 12, 2004: Who benefits from the lack of follow-up? Citigroup, of course. Two examples from last week: on April 7, Chuck Prince, Marge Magner and their successor as high-cost lending wizard Ajay Banga led a team of Citigroupers who filled, nearly entirely, the Jackie Robinson Youth Center in Harlem, all for the purpose of blowing Citi's trumpet regarding the funding of "financial literacy." Many of the journalists present -- or who didn’t' bother to go to Harlem, but only conduct phone interviews -- ran the story without qualification, not even mentioning that Citigroup has settled charges of predatory lending, and also of misleading investors. One reporter who did make this connection disclaimed ICP's congratulations, explaining that it's simply that he has a memory that runs more than a few days backwards. Or maybe the suck-up to Citigroup, by not only regulators but some reporters, has a more sinister explanation...

A second example: after being praised in some quarters for embracing pro-environment policies (allegedly, Sandy Weill decided he didn't want his grandson to hear he was destroying the planet), Citigroup appeared last week on a last of banks who are undercutting even their "Equator Principles" -- and was chided by organizations including Friends of the Earth, and IPS, calling Citigroupers "wolves in sheep’s clothing." But given their history, why would anyone believe these Citigroupers?

Update of April 5, 2004: The financial media's kids-glove coverage of Citigroup continues to amaze. Last week Business Week Online purported to interview Citigroup's Marge Magner, calling her "Sandy Weill's protégé." Yep -- Ms. Magner started as subprime lender Commercial Credit in 1987. BW's run-down of deal didn't mentioned Associates, nor what Washington Mutual Finance Group does (subprime lending). Instead, Ms. Magner was allowed to pontificate about how much due diligence Citigroup does. She states: " you're looking to acquire products, a distribution method, or something that you don't have now that clearly moves you forward in terms of your business strategy or provides greater leverage for your overall business platform. Maybe the acquisition allows you to bring costs down or to distribute your products to an expanding consumer base." So -- what was the purpose of Citi's acquisition of Associates First Capital? Increased predatory lending, including into Japan and India...

Meanwhile, Citigroup's claimed new environmental consciousness is reflected by the selection as "lead outside director" of Alain Belda of the aluminum company Alcoa...

Update of March 29, 2004: This week, some numbers: Citigroup's new CEO Chuck Prince has already been shown to have contributed $2000 to both the Bush and Kerry campaigns.... Meanwhile, higher than last week's estimate, Sandy Weill's payday's now been valued at $44 million: $30 million in cash and 2.5 million options in Citigroup stock worth about $14 million. Robert Rubin, who has claimed that Citigroup' subprime / predatory lending doesn't happen under his aegis, pulled in $17 million....

From the mailbag:

Subj: Citiwatch

Date: 3/24/04 9:49:26 PM Eastern Standard Time

From: [Ex branch manager]

To: CitiWatch [at] innercitypress.org

As a 13 1/2 year former CitiFinancial employee, I have found your report to be quite accurate. I was an award winning manager who left in January for refusing to let my district manager badger me into his predatory lending ways and bullying style. It was so bad that I left prior to my bonus being paid for last year. My branch made a profit of $750,000 which amounts to a "surplus" of $150,000 over Citi's goal for me. However, since I left prior to February's pay out, they refused to pay it to me. This loss amounts to over $8000...This company is not only a predatory lender but a predatory employer.

Meanwhile, Citigroup's high-cost lender CitiFinancial uses the ad agency MindShare Japan for "its entire centralized planning," according to resurfaced journalist Sebastian Tong. Question: does that mean, the centralized planning of predatory lending? In Dallas (strangely), the CAO of " CitiFinancial International Ltd." is a Robb Webb. Is that, "Rob-web," as in "Robbery network"?

Update of March 22, 2004: Simultaneous with its broadcast of voice-over identity theft TV advertisements throughout the United States, on March 19, Citigroup admitted that a magnetic tape containing information on over 120,000 of its customer accounts had gone missing in Singapore. The back-up tape, which had monthly transaction data on 123,690 Citibank customer accounts in Japan, went missing on February 21 while a local security company was transporting it, the Japanese unit of Citibank NA said in a statement. 120,000 people trying to "get their lives back," due to Citigroup's negligence -- how can they film it all?

In Mumbia, India, on March 16, Citigroup announced the appointment of Mr P.S. Jayakumar as Region Head for Asia-Pacific (Consumer Finance). Mr P.R. Seshadri, formerly in charge of Marketing - Consumer Loans, will now take over from Mr Jayakumar as Consumer Finance head in India, where "CitiFinancial provides services in the areas of housing, auto and white/brown goods purchase in addition to mortgage and personal loans."

Citigroup: this is how they steal it. Sanford "Sandy" Weill receiving a 2003 cash bonus of $29 million, according to the bank's shareholder proxy statement filed with the Securities and Exchange Commission. Weill was given a package of more than $30 million for 2003, including salary and other compensation, the proxy said. The package compares with the roughly $18 million in stock options and other compensation Weill received for 2002. Prince, Willumstad and Rubin also made out like bandits -- and we mean that literally...

Update of March 15, 2004: We step back this week from the nitty-gritty of Citigroup's sleaze to two takes at the big picture. Dueling articles in Barron's and the March 15 WSJ tout Citi's global push. The Barron's "analysis" is a puff piece, blatantly seeking buyers for Citigroup's stock. It quotes Citi's CFO Todd Thomson that "[t]his isn't a financial supermarket," Thomson said Friday. "We have no interest in becoming a financial supermarket. What we are trying to do is focus on high-growth and high-return areas of financial services" -- yeah, like predatory lending. The WSJ article is somewhat more informative, quoting the head of Citigroup's international operations Deryck Maughan that Citigroup has targeted 14 countries where it will try to triple its credit-card business in the next seven years, says Mr. Maughan, who declines to name them. He has set similar goals for consumer finance, and aims to build retail branches as quickly as possible in 20 countries. The article continues (speculating about which country) -- "In less than 40 years, the combined economies of Brazil, Russia, India and China -- the BRICs economies -- could become larger than the combined economies of the U.S., Japan, U.K., Germany, France and Italy"... We'll see you (and Citi) there...

Update of March 8, 2004: It took a while -- too long -- but finally Inner City Press has begun receiving from the Maryland Office of Financial Regulation documents responsive to ICP's Freedom of Information request regarding CitiFinancial's hiring of the agency's commissioner, Mary Louise Preis, late last year. Among the documents provided are numerous letters on behalf of Ms. Preis, as Commissioner, ruling against or smoothing over complaints against CitiFinancial. There's even a letter that then-Commissioner Preis sent to the Baltimore City Council replying to the Council's request for an investigation of CitiFinancial -- Ms. Preis responded that no penalties were assessed, since Citigroup had announced (yet again) that it was "changing some of its practices." That Citigroup soon thereafter hired Ms. Preis reveals a blatant conflict of interest and corruption of the public process -- the kind that Citigroup brings to many fields (for example, "http://www.innercitypress.org/finwatch.org", where Citi hired the Federal Reserve's money laundering "guru" Richard Small, after being shows as, but suffering few penalties for, laundering. The Maryland Office of Financial Regulation documents have numerous redactions -- that is, whole paragraphs obscured with magic marker -- which we'll be pursuing.

Update of March 1, 2004: now here's a scary thought: Citigroup, with its predatory lending settlements, is moving to because THE credit history bureau in China. The American Banker newspaper reported last week that "China has no credit bureau, so Citi will gather information on applicants and try to act like a fledgling bureau. Most Chinese consumers do not have experience with revolving credit, so Citi will hold seminars on managing credit wisely. " If this "training" is anything like what CitiFinancial does in the United States, the Middle Kingdom will be rife with predatory lending - perhaps even class action lawsuits, and captured regulators, one day... Meanwhile, JAGfn of Feb. 26 reports that Lehman Brothers " recently met with the management of Citi's Japanese consumer finance operation, CitiFinancial Japan (CFJ). Although a small portion of overall earnings, with improvement in other areas, it has spotlighted areas of remaining weakness like CFJ. We came away impressed that the business has been stabilized, restructuring steps are now complete." Yep, Citi is taking predatory lending GLOBAL...

Meanwhile, in the U.S., questionable "home and auto" insurance, which CitiFinancial routinely imposes on loans, has come to light in a recent jury verdict against Household/Beneficial in Oregon. In the case, Vasquez-Lopez v. Beneficial Oregon, Inc., No. 0210-10108 (Or. Cir. Ct. 01/31/04), plaintiffs Panfilo Vasquez-Lopez and his wife Maria Dominguez, paid $1699 for 10 years' coverage, financed in their loan... Documents in the case show how compensation worked: " The Beneficial & FSB 2001 BSM [Branch Sales Manager] Incentive Plan for 2001, Plaintiffs' Exhibit 11 in the case, showed the following compensation schedule for sales staff in selling this product: under $2000 (a month), 4% of net membership fees; $2,000 to $4,000, 8%; over $4,000, 10%. BSMs get a 35% override"....

Update of February 23, 2004: the lack of regulatory oversight of CitiFinancial's surge in subprime lending is amazing. In response to comments and evidence Inner City Press submitted in opposition to Citigroup's acquisition of Washington Mutual Finance Group, the Georgia Department of Banking and Finance wrote back, disclosing that while CitiFinancial Mortgage Company's number of loans in Georgia decreased from 2002 through 2002, the number of complaints against it continued to rise, that Washington Mutual Finance Corp. was submitted to complaints on over thirty percent of the loans it made in Georgia in 2001 -- but that "Washington Mutual Finance is not a licensee of this department, CitiFinancial does not need to obtain approval from this department for such a transaction... CitiFinancial notified the Department about its acquisition of Washington Mutual Finance... [ICP's] request for an investigation of the activities of CitiFinancial in Georgia has been referred to the Mortgage Division and is currently being considered." We'll see...

Meanwhile, Citigroup on Feb. 23 in Seoul announced it will pay the Carlyle Group and others $2.7 billion for a controlling stake in Koram Bank. The (figure-) head of Citigroup International, Deryck Maughan, threatened, " What we have accomplished in Mexico with Banamex or Poland with Handlowy, we feel we can accomplish in a number of Asian countries." Including the start-up of predatory lending in these markets...

From ICP's CitiWatch mailbag:

Subj: Citifinancial

Date: 2/20/04 2:05:39 AM Eastern Standard Time

From: [ ]

To: CitiWatch [at] InnerCityPress.org

I want to share my Citifinancial experience with you. I don't expect any help, I'm way beyond help. It will be nice to just get this off my chest. I'll start by telling you that I have the distinct pleasure of having Fairbanks Capital "servicing" my first mortgage and Citifinancial holds my second mortgage. When I first took out the second mortage, it was with a company called Security Pacific. Although the interest rate was high, I was at least treated fairly. My troubles began when Citifinancial took over my note. My original contract allowed for a $3.00 late fee for late payments and that was all that was ever imposed. This all changed when Citifinancial took over. There, seemingly, was not enough money in the world to keep these people happy, and daily interest? That was not part of the contract that I signed and agreed to! I was repeatedly harrassed at work (sometimes called 3 times a day) despite the fact that they were repeatedly informed that personal calls were against company policy. They once left a message with a co-worker for me that stated, "you'll be sorry if you do not get a payment in today". They came to my workplace to collect on the spot payments on more than one occasion. They came to my home repeatedly demanding payment. A neighbor reported that their collection person was seen walking around my house, peering into my windows one day when I was not home. They opened my mailbox and left personal messages - no stamp!! The harrassment was unbelievable.

In closing, I believe that Fairbanks Capital and Citifinancial worked hand in hand to bankrupt me. I cannot possibly meet their demands.

Ah, Citigroup...

Update of February 16, 2004: this week, straight from the lion's mouth: Inner City Press has been provided with an internal, rally-the-troops e-mail, from within Washington Mutual Finance Corp. just as it was being acquired by Citigroup. It gives a flavor of what Citigroup looks for, in a subprime acquisition -- the hard sell:

From: Cline, Jerry

To: [Branches]

Managers: We can't afford to lose any time on getting loans this months --- we can't wait till you get back next week to start looking for P[ersonal] L[oans] and R[eal] E[state] loans -- you need to have a meeting today on what you expect your staff to get accomplished while you are gone -- I want you to schedule a Real Estate day for tomorrow -- (our pipelines is poor to say the best [sic]) with focus only on RE from 10:00 to 7:00 (8:30 to 10:00 ID collections). Challenge them to reach a certain number of working RE apps by the time you return from a half day or full day off. Make this total for the group -- assign out your collections routes and talk to them about renewals and RE loans from that -- go over my leads and print potential RE customers if need be -- I do expect you to follow up on what they do each day -- don't forget to assign someone in your office a security level of 40 and make sure check signing is covered. This person needs to be in charge and responsible for getting things done -- I'll say this again, it is imperative that we get going on building our RE pipeline immediately.

Business development goals -- goals 18 P[ersonal] L[oans] per FTE / 2 R[eal] E[state Loans] per FTE -- look at your budget that just came out -- this is very do-able -- you have a great staff but don't let them get on cruise -- keep the hammer down! Here are some employees who can take a look at some larger deals -- Brenda Huskey... Donna Reeves -- I want you to be in touch with your teams 2 or 3 times a day to keep them motivated and focused on getting results. -Jerry Cline, Supervisor, District 04

"This material is property of Washington Mutual Finance Corporation or its subsidiaries, is confidential, and is presented for internal use only."

What Citigroup wants -- and demands and brings about -- is the pushing of loans. It's not a matter of whether the customer wants or needs to have their loans refinanced -- quotas are set, numbers are built up, often by tricking and deceiving customers. Hear Leo roar! Meanwhile, indicative of CitiFinancial's lack of interest in compliance, we can report that Rosie Collins, an employee previously found to be packing insurance, is now... back on Broadway! (At the Broadway office in Knoxville, TN, that is -- and as branch manager). Because insurance packing is what CitiFinancial is looking for. There will be further reviews of performance, on Broadway and off... To the East, it's reported that Citigroup is stalking a $1 billion stake in KorAm bank in Seoul...

Update of February 9, 2004: While Citi's executives pitch credit cards in China, and make passes at Deutsche Bank and others, the subprime dirty work continues: case in point is Tennessee. Until last week, that state's governor, Phil Bredesen, was pushing for anti-predatory lending legislation, the Tennessee Home Loan Protection Act. Then, following the OCC's preemption announcement, Gov. Bredesen gave up, and has decided instead to focus on mortgage brokers. Therefore, even non-bank lenders will escape scrutiny. The result? Last week, the Tennessee Department of Financial Institutions talked tough to a mortgage broking company, specifically about a jocular marketing flier which announced, entirely accurately, that CitiFinancial is subject to a predatory lending settlement with the Federal Trade Commission. DFI Commissioner Kevin Lavender, previously an employee of SunTrust Bank, doesn't like brokers bad-mouthing subprime lending companies, at least not CitiFinancial. Meanwhile Commissioner Lavender has refused to release any information about consumer complaints against CitiFinancial or Washington Mutual Finance Group -- even a summary or mere enumeration of complaints. So who's being protected? The answer: CitiFinancial...

Update of February 2, 2004: A new regime at CitiFinancial? Documents provided to Inner City Press last week include a letter from CitiFinancial's general counsel (and ex-Maryland regulator) Marry Louise Preis, purporting to respond to issues ICP has raised. Interestingly, neither Ms. Preis nor anyone else at Citi saw fit to send a copy of this purported response to Inner City Press, or any other commenter. Ah, transparency...

Update of January 26, 2004: Still flowing in, responses from state regulators regarding Citi - Washington Mutual Finance Group. From Baton Rouge comes a letter, from Louisiana Commissioner of Financial Institutions John D. Travis, stating that Citi filed no WaMuFi-related application, but that ICP's other requests "will be taken under consideration by me." The state's chief examiner is cc-ed, so we'll see. Meanwhile last week, Citi's CEO Chuck Prince, tearing himself away momentarily from his new "http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20040122005162&newsLang=en" in thorny green problems, said that the purchase of the subprime WaMuFi -- with a predatory lending jury verdict against it, and along with rank sexual harassment -- is just the type of acquisition that Citigroup will be looking to make in 2004. Great...

Update of January 20, 2004: We focus this week on what it is, exactly, that Citigroup is acquiring along with Washington Mutual Finance Group. WaMuFi's operations in Mississippi, where it is subject to a $70 million predatory lending jury verdict, were cynically (and quietly, until exposed) excluded from the deal. Now, Inner City Press has been made aware of a sexual harassment lawsuit filed earlier this year against WaMuFi, branch manager Clarence Porter and other management at Aristar and its successors (i.e., Citigroup). We'll first quote from the Complaint, then add details from a recent ICP interview with the plaintiff, Glynda Shealy:

Plaintiff was first hired by [WaMuFi] on or about August 26, 1988... During Plaintiff's employment, here supervisor, Clarence Porter, made repeated unwanted advances of a sexual nature to the Plaintiff, including, but not limited to, inappropriate graphic sexual comments and actions. These actions were uninvited, unwelcomed and resented by the Plaintiff.

ICP note: these actions, the plaintiff has told ICP, included Clarence Porter putting a lion sock-puppet "on his, uh, private area" and ordering the plaintiff to "pet my Leo until he roars." When complaints were made up the chain of command, nothing was done. Ms. Shealy (who thankfully is not subject to any gag order, since Citigroup due to the above-recited never "acquired" her) also states that WaMuFi engages in predatory lending, including selling overpriced credit insurance that is not requested, and charging 24% interest even if the borrower has a pristine credit history. This, is what Citigroup is acquiring.

Update of January 12, 2004: Citigroup's lobbying spending for the first six months of 2003, $4.6 million, was sharply up from full-year 2002 ($5.4 million). Trying to avoid the repercussions of Enron, et al, sure. But also lobbying against state anti-predatory lending laws... Despite its loudly-claimed reform, Citigroup's involvement in the Parmalat scandal is telling. Citi is being questioned about Buconero, or "black hole," an offshore finance company Citi set up in 1999 in which it owned 51 per cent and Parmalat, through a subsidiary, 49 per cent. Parmalat booked the $137 million deal, renewed in 2001, as equity, but some now claim it should have been recorded as debt. Despite the Enron-like smell, Citi claims that its role in Buconero was "appropriate." Oh, really?

Lost in the Comptroller of the Currency's preemption order last week was the fact that, even when national banks apply to the OCC to set up these subsidiaries, the public notices given in the OCC's Weekly Bulletin are incomprehensible: there's no way to know what is being applied for. A Citi example:

OPERATING SUB/ ACQUISITION OF EXISTING SUBSIDIARIES 2003ML080018001461 CITIBANK, NATIONAL ASSOCIATION 399 PARK AVENUE NEW YORK CITY NY 10043 NEW YORK COUNTY RECEIVED 12/29/2003 PROVIDE SERVICES TO BANK/AFF

What is it? There's no way to know. And since the applicable comment periods run out before the OCC responds to FOIA request for copies of applications, the public must either comment blind, or just let it slip on by, and place faith in the OCC to regulate Citigroup...

Update of January 5, 2004: Citigroup, in a series of Nov. 24 letter mailed to regulators in 25 states, claimed that it would be consummating its proposal to acquire Washington Mutual Finance Group by or near the end of 2003. Having commented to these regulators, and having seen no response to regulators by Citigroup, this is hard to imagine. Most recently, the California Department of Corporation has disclosed fraud complaints against CitiFinancial Mortgage Company, business practices complaints against CitiFinancial Services, Inc., and, strangely, complaints in 2003 against ex-Associates, now CitiFinancial "Transouth Financial Corporation."

Update of December 29, 2003: Inner City Press last week received from the North Carolina Commissioner of Banks a letter claiming that his Office "does not have jurisdiction over" the proposed sale of 37 WaMu Finance offices in North Carolina to CitiFinancial. We disagree, and have replied to that effect. (South Carolina, for example, states that licenses can be transferred if the acquirer, even if already licensed, can past character and fitness tests and show advantage and convenience to the community -- all dubious, for a predatory lender). The NC letter also claims that most consumer complaint information is confidential under NC law -- which contradicts detailed information ICP was provided with by the NC AG's Office. But Banking Commissioner Smith provides a break-down of complaints in NC -- there are more complaints over the past three years against CitiFinancial than WaMu Finance, particularly with regard to consumer (non-mortgage) loans. We have asked for the underlying complaint files. Meanwhile, the Louisiana Office of Financial Institutions' general counsel Gary Newport writes that "to date no application for acquisition has been filed with this office on behalf of Citi, therefore any investigation by the commissioner of such a proposed acquisition is premature." We'll see....

Update of December 22, 2003: ICP/Fair Finance Watch is now pursuing the Mississippi exclusion issue, Robert Rubin's claim that he (and Citigroup) are not aware of predatory lending issues at WaMu Finance, and several hundred pages of complaints against CitiFinancial which ICP has recently received, in a second round of comments just submitted to state regulators. Here's a representative complaint:

"Nobody told me or my wife about the loan being a daily interest loan at the closing or we wouldn't have signed. After I made two or three payments I found out something was wrong and I went to Jennifer [Dickerson] and she told me it was a daily interest loan... This type of loan should be against the law... I'm not trying to get out of paying what I owe in 60 payments and of course some interest like an APR of 7% but the daily interest loan is ridiculous, you can't even payoff a loan like this. I told Meredith that I have a hearing problem and also that I have a brain problem.. I'm a disabled veteran of foreign wars and I can't hear very good.. I can't afford to pay two payments a month, I tried, it messed me up. They asked me if I wanted to take out life insurance in case something happened or I died. That I was told that because I took the insurance, the daily interest changed.. I never told them I was 51, I told them I was 64...I'm going to be in serious trouble if this is not resolved."

To this, CitiFinancial responded:

"We are sorry [ ] did not understand that the loan was an interest bearing loan... The life insurance was cancelled back to the date of loan since we had the wrong birth date and should not have sold him the insurance... we were not aware of his hearing problems of his brain problems as he put it... We are regulated by the state examiners and did nothing different on the loan than any other loan."

And that's just the problem -- this is a TYPICAL CitiFinancial loan...

How does CitiFinancial get away with it? Well, also among the responsive documents are e-mails reflecting that West Virginia legislation in its draft form was circulated by the regulator to CitiFinancial's April Park, in Baltimore, and Citigroup Vice President for Government Relations, East Division, Robert Sweeney, in DC, who responded with "proposed revisions and comments." This despite the fact that even the W. Virginia regulator felt compelled to deny licenses to at least four Primerica agents who were put forward by Citigroup for mortgage broker licenses.

CitiFinancial's outreach to regulators is also reflected in Idaho's (initial) FOIA response (which was provided only after the regulators informed both Citi and WaMu of ICP's request). There's a Nov. 25 telephone message slip of CitiFinancial's ex-Maryland Commissioner Mary Louise Preis calling for Idaho regulator Gavin Gee ("call if you need more info" about Citi-WaMuFi), then an e-mail within the agency, "Gavin has notifed me that if we get an questions / complaints / concerns from callers regarding CitiFinancial's recent purchase of Washington Mutual Finance Corporation, we should refer them to 'Mary Louise Preise' (pronounced like 'Price'). Ms. Price is the state-relations person for CitiFinancial..."

Question: why would those who contact the government agency to complain about Citigroup be referred to CitiFinancial's Ms. Preis?

A representative Idaho complaint involves a pre-payment penalty allegedly not disclosed when the loan was made, and an inquiry getting bounced around within Citi, since "Team Lead" of "Executive Communications" Troy Jacob writes, "CitiFinancial and CitiFinancial Mortgage, while both members of the CitiGroup are two separate companies. We do not have access to CitiFinancial accounts here at CitiFinancial Mortgage." Great...

And now, back to W. Virginia, for a complaint that we've heard from all over: a complaint of "not receiving a timely payoff." CitiFinancial in West Virginia and Baltimore deny it, but here is a recent experience that's been recounted to ICP:

An individual who'd paid of their loan to CitiFinancial Mortgage back in February 2003 discovered there was still a Citi lien outstanding. A labyrinth of calls ensued:

Tamika Small of Customer Service couldn't help; nor could her supervisor Nathan Jones. Mr. Jones was asked for the telephone number to the legal department; all he offered was the fax (which was used to no avail). Mr. Jones supervisor Mike Herrea was out of town; his supervisor Jeffrey Waite was said "not to take calls." Now that's customer service. A Peter Walker said there's nothing he could do; so did Alan Balthrup. Finally the caller tried Baltimore rather than Texas. But most customers wouldn't do this... Similar, back in Tennessee, Brian Darnell (previously covered in this Report) now refuses payoffs, and will not hand over payment histories to customers who request them. We've heard of trying to hold onto customers -- but making grandmothers cry at Christmas is probably not the best way...

Interim Update of December 15-16, 2003, to the longer Dec. 15 Report, below: The Seattle / Puget Sound Business Journal, citing Inner City Press' prior report, got Washington Mutual to confirm that CitiFinancial is not even trying to buy WaMu Finance Group's Mississippi offices. WaMu's prepared statement specifically refers to the $71 million predatory lending verdict against WaMuFi's operations on Mississippi. The "http://seattletimes.nwsource.com/html/businesstechnology/2001815978_bizbriefs16" that "Washington Mutual says it will continue to operate 18 Mississippi branches of Washington Mutual Finance, the controversial subprime-loan unit it is selling to Citigroup. Inner City Press, a consumer-advocacy group, said yesterday that the branches were excluded from the $1.25 billion transaction because of a $71 million predatory-lending verdict against the WaMu unit in Mississippi last year. The Mississippi branches weren't mentioned in statements by WaMu and Citigroup on Nov. 24 announcing the deal." The"http://seattlepi.nwsource.com/business/152610_wamu16.html", " Inner City Press contends that if Citigroup believes it is escaping the predatory-lending issues raised in the Mississippi case by excluding offices in those states, it's mistaken." Yep... Citi's spin, contained in the American Banker of Dec. 16, is that it's only not buying in Mississippi because WaMu, for no reason at all, is "liquidating" its operations in the state. The Mississippi regulator, John S. Allison, is quoted that neither WaMuFi nor Citi have ever done anything wrong in his state. He provided a similar letter for WaMu two years ago. Policy question: this is the state consumer protection one's supposed to rally around? For shame (and, developing...).

Report of December 15, 2003: Inner City Press has just learned that Citigroup, which was reported based on its own Nov. 24 statements to be acquiring all of the subprime lender Washington Mutual Finance Group, has in fact excluded WaMuFi's 18 offices in Mississippi from the proposal. ICP learned this in a response from the Mississippi Department of Banking and Consumer Finance to ICP's Dec. 1 Freedom of Information Act request. Deputy Commissioner Theresa L. Brady, in a Dec. 9 letter to ICP, states:

"Please be advised that it is our understanding that pursuant to correspondence from Citigroup, that WMFC's Mississippi loan offices and receivable are excluded from the transaction. Thus, Citigroup's acquisition of WMFC will not include the eighteen (18) WMPC locations in Mississippi.... Please be advised that all applications, documents and correspondence that you have requested will only be released via subpoena."

The basis for Citigroup's silent carve-out of WaMuFi's Mississippi branches would appear to be the $71 million predatory lending verdict against WaMuFi in the state of Mississippi. [The verdict was first reported in the Jackson, MS Clarion Ledger of June 14, 2001, ""http://www.clarionledger.com/news/0106/14/a3.html"," and was subsequently further disseminated, and raised by ICP: see below. It appears that Citigroup has implicitly acknowledged that predatory lending issues exist at WaMuFi, but has tried to argue, again silently, that these issues exist only in Mississippi. But in fact WaMuFi's practices, including training and sales practices, are not materially different in WaMuFi's operations in its other 25 states.

Citigroup's Nov. 24 press release was headlined, "Citigroup to Acquire Washington Mutual Finance Corporation for $1.25 Billion" -- it did not say, "Part of WMFC." It quoted Marge Magner, CEO of Citi's Global Consumer Group, that "[o]ver the past three years we have raised the bar for professional practices and conduct in the consumer finance industry, gaining the positive recognition of many consumer groups and industry observers alike." It's a $1.25 billion proposal, in a field in which Citigroup has been sued, by the Federal Trade Commission. But in a second round of duplicity, beyond the material omissions from Citigroup's Nov. 24 press release, here is the transcript of a question-and-answer with Robert Rubin, the chairman of Citigroup's executive committee, which ICP conducted on December 11 on WNYC Radio, 820 AM in New York:

ICP: Good morning. Hi, Brian. Mr. Rubin, I was wondering if you could describe, as you don't in your book, what if anything you've done to address the predatory lending with which Citigroup has been charged, by the Federal Trade Commission and by the community group Inner City Press in its recent report, Predatory Bender. That's the process of lending at very high interest rates, unmerited by people's credit scores, through CitiFinancial.

Robert Rubin: Well, I think in fairness to Citi, and it's not a project that has come under my aegis, but in fairness to Citi, I think they've had a very successful, well, a very active and proactive program to deal with issues around subprime lending, and they've gotten a lot of credit for it from a lot of parties, so I, as I say it's not something I've been involved in personally but I think that they have done a job very responsive to the concerns that people have had and they've gotten a lot of credit for it amongst many groups.

ICP: I think they've been sued by the FTC, and I think concerns still exist and yet they continue to buy other subprime lenders, such as Washington Mutual Finance Group.

So I guess I just think that, since you were at Treasury and you're such a public policy man, I would have, it would seem, it would seem that it would behoove you to, an issue that impacts low income and minority communities, to get involved in making sure it's cleaned up.

Rubin: Well, uh, let me say this, I think it is exceedingly important to low income -- while I was at Treasury I was very focused on uh the availability of credit for low-income groups, because it's been a real problem in this country and, as you may remember, the Community Reinvestment Act was under great threat, we threatened to veto any efforts to eviscerate the CRA. I think subprime credit plays a very important role in the life of low income people and I think, I don't think there's any question as a matter of fact, that when Citi acquired Associates that was a very good step forward in terms of improving the provision of subprime credit in terms of the kind of concerns that you have and if there are issues with Washington Mutual, I don't know if there are or not, I just don't know, but if there are, that's something that Citi will deal with. Let me just say, very quickly, that I don't know of any such issues.

Host Brian Lehrer: I know you're relatively new as chairman of the executive board of Citigroup, but as someone who comes under a politically progressive mantle, when I search the Web, under Citigroup, as I did this morning in anticipation of talking to you, the two main things that come up are Citigroup's own related sites and issues having to do, you know, activist sites having to do with the predatory lending allegations. So, it's something you may want to get your mind around.

Rubin: Yeah but let me just repeat what I said. Look, there are people who are going to allege all kinds of things, I don't think that's the issue, I think the issue is what are the reality, and in terms of the realities, I think an awful lot of people who have what I would call a balanced view of this, who feel that Citi has done a very good job of dealing with a set of very complex issues some of which, actually a fair number of which I suppose, they inherited when they acquired Associates.

In this transcript, the original audio version of which is available "http://stream.realimpact.net/rihurl.ram?file=realimpact/wnyc/raotl/bl121103b.ra" (this segment runs from 19:25 to 22:00) , Citi's Robert Rubin claims to not be aware of any predatory lending issues at Washington Mutual Finance Group. Forget for a moment Citigroup's Mississippi carve-out, and Marge Magner's quote and involvement: that predatory lending issues exist at WaMuFi was publicly reported in connection with Citi's Nov. 24, 2003, announced (see, for example, the Seattle Times of Nov. 25, 2003, at C1, "Washington Mutual Selling Controversial Loan Subsidiary," which reported that "[t]he predatory-lending allegations dogged WaMu as it expanded into new markets. In New York City, for example, activists called for the bank to revamp its business practices before taking over Dime Savings." That is correct: ICP began publicly raising WaMuFi predatory lending issues well before Citigroup's Nov. 24 acquisition proposal, see, e.g., the American Banker newspaper of October 21, 2001, "Group Protests Deal," noting "a $73 million jury verdict in July against another unit, Washington Mutual Finance Group. The Seattle Post-Intelligencer of October 16, 2003, reported that ICP "accused Washington Mutual of predatory lending to minorities through its subprime lending subsidiaries;" there have also bee reports in the National Law Journal (of July 9, 2001) and in various other legal publications, e.g., <"http://www.verdictsearch.com/news/specials/0204verdicts_baker.jsp">, reporting that "[s]imilar claims by several hundred other Washington Mutual customers are pending."

Ostensibly, Robert Rubin, who is paid tens of millions of dollars a year by Citigroup, doesn't read the newspapers, or have them summarized for him at least on issues surrounding companies that Citigroup is proposing to buy for over $1 billion. Either he is inattentive, or he is lying, it seems. Substantively, while Citigroup is implicitly arguing these issues exist only in Mississippi. WaMuFi's practices, including training and sales practices, are not materially different in WaMuFi's operations in its other 25 states. ICP is pursuing this; watch this space. Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of December 8, 2003: ICP's December 1 comments to regulators in 25 states opposing Citigroup's proposal to acquire over 400 subprime lending offices of Washington Mutual Finance Group have resulted, one week on, in responses from seven states: four in writing, and three only oral, so far. In a fit of candor, the Kentucky Department of Financial Institutions has responded that:

"We have received numerous complaints against Washington Mutual, most concerning their failure to properly credit customers' accounts but, unfortunately, the Department does not have copies of those complaints. The lady who handles consumer complaints was under the mistaken impression that anything having to do with Washington Mutual was not to be handled by our Department but was to be forwarded to the Office of Thrift Supervision. She thought, since the banking business of Washington Mutual was federally regulated, that the consumer loan business of Washington Mutual was also federally regulated. She has no record of the number or content of such complaints registered over the past three years old than a knowledge that many of the complaints concerned a failure to credit customers' accounts resulting in complaints of unauthorized threat of foreclosure. We will attempt to work with you in this matter. We appreciate your concern and invite further correspondence."

There will be more. For now, Inner City Press has submitted a Freedom of Information Act request to the Office of Thrift Supervision, for documents including this mis-forwarded complaints against WaMu Finance, and Citigroup-related complaints. The Kentucky DFI has stated it will send copies of the "complaints registered against Citigroup / CitiFinancial... with the application of Citigroup for change in control of Washington Mutual which has not yet been filed." South Carolina's Board of Financial Institutions says that, as of December 3, "we have only been notified by phone that the merger was in progress. We have not received any written confirmation or notice at this time." The Idaho Department of Finance, by letter dated December 4, states that the "Director takes note of your general allegations of improper lending practices by CitiFinancial," but requests information about sales and loans to Idaho residents. ICP has provided insurance sales training scripts, and CitiFinancial tallies of Sales Finance Conversions in the many states, including Idaho. So that should be enough... From the mailbag:

Date: 12/2/03 1:58:00 AM Eastern Standard Time

From: [ ]

To: CitiWatch [at] innercitypress.org

Hello. I have been reading your site re Citigroup. I have been having a lot of trouble with them, much like your posts say. I originally borrowed $800 from CitiFinancial, with my 1992 Geo for collateral. They added $200 for 3 years, total $600, and said I needed to have them as liability on insurance. They never told me that I can get it on my own, then borrowed $1000. Payments were $176 / mo . then I believe I got $500, not sure, it seem like I have been paying on this forever and yet they say I owe $4600 now. They wanted to give me a mortgage for $10,000. I said no, I asked for 500 to buy another car, they said no, but would give me $10,000 home loan. I did not do. They called endlessly, called friends etc even though I had been returning calls. They left messages on my machine in detail about what I owe etc. They did not want the car because I had told them that the motor went, I told them to pick it up they said they did not want my car, they want my home. I said I never signed my home for any collateral, they said watch them do it. They also insisted I give them post-dated checks, I said that was illegal they said no, as long as I get the $ in account, so I was forced to do that on approximately 4 checks, which was a hatchet over me. then I lost work and began a domino effect, I could not pay a payment I was paying 22% ... it did not dawn on me that the payoff was always the same as if I had never paid anything. then I again lost work and could not pay, I asked for 3 weeks to borrow / they said no. now they are suing me, and have in past to take my home. I am 68 years old senior, and don't know what to do or what my rights are, and don't have money for a lawyer. I pray I don't lose my home..

What a company... Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of December 1, 2003: late on Monday, November 24, Citigroup announced a proposal to acquire over 400 subprime lending offices in 25 states from Washington Mutual, for $1.25 billion. Reporters were told of the deal by Citigroup's press flacks at 7 p.m., while some of them were fawning around Citigroup's prized show dog, Robert Rubin. No one, apparently, dared ask the ex-Treasury Secretary: why are you the front-man for a predatory lender? Soon Mr. Rubin jetted west to San Francisco. Twenty-eight of the WaMu Finance offices at issue are in California; on the other hand, sixty are in Tennessee. Press accounts described WaMu Finance as serving small town America; Citigroup emphasized the "footprint" in Florida and Texas, shamelessly equating Latino with subprime. Thirty-six of the offices are in Louisiana, and 37 in North Carolina. The reality is, there are more WaMu Finance offices in Tennessee than in Texas, and more in North Carolina than in Florida. This is CitiFinancial targeting Subprime Central -- we are Inner City Press have a name for this: "http://www.innercitypress.org/predatorylending1.html", it's what Citi's on. Inner City Press has now filed comments and exhibits opposing Citigroup's WaMu Finance proposal, and asking for investigations of CitiFinancial, with regulators in 25 states; each is viewable by clicking the name of the state: "http://www.innercitypress.org/citistates.html" \l "alabama", "http://www.innercitypress.org/citistates.html" \l "california", "http://www.innercitypress.org/citistates.html" \l "delaware", "http://www.innercitypress.org/citistates.html" \l "florida", "http://www.innercitypress.org/citistates.html" \l "georgia", "http://www.innercitypress.org/citistates.html" \l "idaho", "http://www.innercitypress.org/citistates.html" \l "illinois", "http://www.innercitypress.org/citistates.html" \l "indiana", "http://www.innercitypress.org/citistates.html" \l "kansas", "http://www.innercitypress.org/citistates.html" \l "kentucky", "http://www.innercitypress.org/citistates.html" \l "louisiana", "http://www.innercitypress.org/citistates.html" \l "maryland", "http://www.innercitypress.org/citistates.html" \l "mississippi", "http://www.innercitypress.org/citistates.html" \l "newmexico", "http://www.innercitypress.org/citistates.html" \l "northcarolina", "http://www.innercitypress.org/citistates.html" \l "ohio", "http://www.innercitypress.org/citistates.html" \l "oklahoma", "http://www.innercitypress.org/citistates.html" \l "oregon", "http://www.innercitypress.org/citistates.html" \l "pennsylvania", "http://www.innercitypress.org/citistates.html" \l "southcarolina", "http://www.innercitypress.org/citistates.html" \l "tennessee", "http://www.innercitypress.org/citistates.html" \l "texas", "http://www.innercitypress.org/citistates.html" \l "utah", "http://www.innercitypress.org/citistates.html" \l "virginia", "http://www.innercitypress.org/citistates.html" \l "washington", "http://www.innercitypress.org/citistates.html" \l "westvirginia"... See also, ""http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1069493629420"," by Gary Silverman, Financial Times, December 2, 2003. Also, on November 24, Inner City Press filed a lawsuit against Delaware Governor Minner, and the state's Attorney General, for enforcing an unconstitutional provision of Delaware's Freedom of Information Act, limiting the right to documents to residents of the state. Click "http://www.delawareonline.com/newsjournal/local/2003/11/27lawsuitchalleng.html" for the "http://www.delawareonline.com/newsjournal/local/2003/11/27lawsuitchalleng.html" (also onsite "http://www.innercitypress.org/icpdefoi.html").

Update of November 25, 2003: CitiFinancial, ever hungry to bolster its predatory lending firepower, announced after close of business on Nov. 24 a proposal to buy more than 400 branches of Washington Mutual Finance -- a company which itself has been subject to large predatory lending verdicts. See, for now, "http://www.innercitypress.org/dime.html"; also, ICP's on record v. WaMu Finance, in Newsday of July 30, 2001 (quoting ICP that "we know the company has had some troubles in the past with predatory lending. On June 13, a jury in Lexington, Miss., awarded $71.27 million in damages to consumers who charged Washington Mutual's subprime unit with fraud. The loan officers at the Greenwood, Miss., office of Washington Mutual Finance Group were persuading customers to refinance loans at a rate nearly seven times higher than other loan offices in the state, plaintiffs said. In early 1998, 23 customers sued Washington Mutual Finance, charging fraud and breach of fiduciary duty. The company denied any wrongdoing. Post-trial motions are pending." See also, Financial Times of September 6, 2001; American Banker of October 16, 2001; Bergen (NJ) Record of January 8, 2002, etc.. Developing.

Update of November 24, 2003: at the November 18 Merrill Lynch conference, Chuckles Prince bragged, "It would be hard to transform Citigroup. We would have to merge with Canada." Since Citi buys up government officials, the statement's not really a joke... Prince and Citi's CFO Todd Thomson "said the company may expand outside the United States, especially in such countries as China and India where Citigroup sees strong growth potential and already has a presence. 'I expect that our mix will edge back a little more towards international than it is today,' Prince said." Like we said: predatory lending goes global. Meanwhile, the following was submitted to Human Rights Commission in Florida, resulting in a right-to-sue letter:

I wish to file a complaint and request an investigation into the employer practices of Universal Card Services/Citibank. They have discriminated against me and wrongfully terminated me. It began when my foot was damaged on their site in August 2001. I was on Medical Leave and upon my return I was told I no longer had a position within the company. I was told that my job was not available to come in and apply for another position. When I went in to the building to apply for another position I found my position was listed on the board of job postings...

I was terminated from my position because I was disabled after having an accident on their property whereas my foot was damaged. Weeks later, due to propping my foot up on the hard-drive underneath my desk, as advised by the Workers Compensation Physician, I ruptured a disc in my neck. At one point during a meeting, the Operations Manager, Bill O’Neill told me I needed to stay within the Unit I was currently working with because "of my age." He told me that they needed an older person on that team. I also feel pressure from my Manager, Mark Gorbsky, who was always trying to argue with me. He would seek me out to harass and then if I happened to be in his office he would make comments such as: "Blink, your eyes have me mesmerized." This gave me a very uneasy feeling. It felt like a sexual related remark, I would never respond to such remarks because I feared losing my job. There are many people at UCS/Citibank who can verify my complaints. It is difficult to obtain statements from them because they are fearful of losing their jobs.

While on leave I often spoke to my peers and we had normal conversations. Upon being told that there was not a position for me….my peers stopped talking to me. Judy Cupp, a peer, told me her Supervisor, Terry Bladey, advised her per H.R. Rep Joann Kotchcowski, told them to stay out of it and not discuss anything with me. Every time I called someone I started running into a wall. When I called people in H.R. in hopes of finding a position, my calls began going unanswered. This is a very long story, I made many, many calls while trying to return to my job and they were not returned.

Joann Kotchcowski, she must have power over everyone in personnel and the company supervisors, she called me and said I understand you are calling everyone in Citibank, You are required to find a position just like everyone else. I had left only two messages for people at that time. They did not intend to terminate me until I faxed over a request for special accommodations due to my injuries.... As shown by the information attached, I was an outstanding employee and there was no other reason to terminate me other than I am old and became physically damaged while working there.

What a company...Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of November 17, 2003: So here we go: new Citigroup CEO Charles O. "Chuck" Prince, and Todd-the-CFO, will be appearing on Nov. 18 at Merrill Lynch's Banking and Financial Services Conference. It may be that questions will arise about the relation of Citigroup to "http://www.innercitypress.org/predatorylending1.html" -- we'll see.

Update of November 10, 2003: Citigroup's two-tiered financial system, and how it treats its employees: there are variations but a lot of similarities too. Take, for instance, Citi's subprime lending CitiFinancial, and its subpar insurer, etc., Primerica. News reaches us this week of a 19-year Primerica employee who suddenly realized that an insurance product he'd been selling at Primerica for $361 a month was sold by another Citigroup unit, Travelers Life, for $178 a month. Identical product, sold at double the price to a more down-market (and more "minority") customer base. The man quit Primerica, which now, along with Citigroup, is suing him. The charge is failure to abide by a non-competition clause Primerica makes its employees sign: that they will not recruit customers or employees within fifty miles of their home or office. But the vehemence of the suit is clearly intended to scare other employees from blowing the whistle, or even from leaving the company. It's reminiscent of CitiFinancial's retaliation against our favorite jocular ex-employee in the Tennessee market, a case we're following closely.

Update of November 3, 2003: Another week, another fine. The SEC let Citigroup off cheap, for $1 million, for misleading WorldCom employees. " Citigroup spokeswoman Kim Atwater said the bank had no comment." Similarly, even while bragging last week, a spokeswoman for CitiMortgage "couldn't specify how much of that is for low-income borrowers." Only for people who (wisely) say "no" to CitiFinancial... Meanwhile, Barron's of November 3 lists, as Citigroup's possible next targets (in the United States), the following three banks: South Trust, Regions Financial and AmSouth. Apparently their view is that Citi's heading south....

Update of October 27, 2003: at Citigroup, the revolving door continues. This time, CitiFinancial has hired the just-former banking and financial services commissioner of Maryland, Mary Louise Preis, to come on down -- and, if the past is any guide, to flak for predatory lending practices. In a statement, Kevin Kessinger, president of Consumer Finance North America, said, "We are delighted that Mary Louise has decided to join CitiFinancial in this important new role." She's to begin on November 10.

ICP's previous experience with Ms. Preis includes her review of comments on HSBC's applications to acquire "http://www.innercitypress.org/hsbc.html". On March 28, 2003, as the deal was being consummated, Ms. Preis sent ICP a copy of her HSBC-Household approval order, along with a cover letter stating that "[w]e are completing at this time our processing of your request for complaint information with respect to Household." Preis' approval was conditioned on, among other things, HSBC conducting regular audits of Household, including for compliance with the (narrow) AGs' settlement; "within 30 days after the findings of each regular audit a copy of the findings will be forwarded to the Commissioner," and that HSBC "honors all present and future judgments, settlements, and regulatory actions taken against [Household], and agrees to take corrective action to assure [Household's] continuing compliance." There were also a number of conditions regarding the so-called "referral-up," including "the alignment of HSBC Bank's and [Household's] product lines and credit policies toward the goal of minimizing customer disparities in products and pricing until implemented; ... [and a] 'competitive review' conducted by [Household] to determine how branch offices of HFC and Beneficial might expand their products; and.. the development of the risk-based pricing model, training and underwriting and thereafter receive quarterly updates until full implementation."

There was more -- and a question that will arise is whether CitiFinancial is doing these things. Even as to reporting, we think not -- for example, the most recent anti-predatory lending "report" on Citigroup's web site is from 2002, more than ten months ago. Citigroup seems to think that by throwing money around (and hiring ex-regulators), it can continue blithely and without consequences with its predatory lending. We say no... A footnote: Inner City Press has now filed a Freedom of Information request for all of Ms. Preis' communications with or about CitiFinancial, before she took the job. We will be looking more and more closely at the revolving door(s)...

Update of October 20, 2003: Welcome to hell -- last week Citigroup said-in-a-statement that it has appointed a Director of Global Compliance: a lateral hire from Deloitte & Touche and before that the Office of the Comptroller of the Currency (OCC), Mr. Thomas F. Rollauer. One of the hells we're referring to is CitiFinancial, whose predatory practices are described in detail below in the Report. But we're also left wondering about the propriety of the OCC's examiner-in-charge of Citibank now going to work to Citibank itself...

Update of October 13, 2003: Sleaze going global: last week the FT Deutschland reported that Citigroup's Sandy Weill had met Roland Koch, the head of the state of Hesse, home of Germany's financial capital Frankfurt. "He showed a great interest in the German banking landscape," Koch was quoted as saying. Sandy Vile as ambassador for predatory lending... This week from the mailbag, problems not only of CitiFinancial's customers, but also of its employees:

Subj: CitiFinancial

Date: 10/10/03 1:46:35 AM Eastern Daylight Time

From: [ ]

To: CitiWatch [at] innercitypress.org

I am a long time (over 7 years) employee of CitiFinancial. I was recently involved in an automobile accident while on company business, while in my own vehicle. Not only was there little to no concern over my personal condition, the company policy states that only $250 of an insurance deductible is reimbursable, and there is no compensation for any medical or car rental expenses incurred by employees in this situation. I have full coverage on my vehicle, but if I did not, the company policy is that there is no compensation to the employee at all.

Update of October 6, 2003: The coverage of Sandy Weill's supposed stepping-down was overblown. Meanwhile, in an indicative CitiFinancial customer-relations coup, the borrower most recently described, Doug Roach, now faces sheriff's sale on his house, against which CitiFinancial made loans without his knowledge or consent. In most places this would be called a crime -- at CitiFinancial, it's just profit margin -- or, how they earn it. Predatory lending is no small part of the source the $264 million Weill got last week from Citigroup...

Update of September 29, 2003: Here's a CitiFinancial scene not as rare as you'd think: last week a CitiFinancial employee in Pennsylvania pleaded guilty to "demand[ing] improper cash payments from borrowers as a condition of granting loans... Matthew Petraglia, an assistant manager for CitiFinancial, falsely told borrowers that the payments were for closing or settlement costs and took the money for personal use... n one instance, Petraglia obtained personal, consumer and mortgage loans for a Bethlehem woman with a poor credit history. She needed financial help, partly because she was struggling to pay legal fees for a child custody fight. He demanded improper cash payments from her three times, according to the settlement agreement. On one occasion, the borrowers daughter was in a hospital recovering from a car accident. At another time, he drove with her and her children to her bank, according to the agreement. The borrower cashed a check and handed money to Petraglia."

Incredibly, "'CitiFinancial believes it has a responsibility to set an example of excellence in the way its conducts business,' said CitiFinancial spokeswoman Maria Mendler." It's easy to try to lay this all off on bad-apple employees. But given the way CitiFinancial cynically "incents" its employees, through ROCOpoly bonus based on volumes of sales, and trains employees in how to manipulate consumers, we blame these scams, which we've found each time we've looked closely at CitiFinancial in a state, directly on Citigroup and its top management. Sandy's supposed leaving (yeah, right); but those in the second (now first) tier are all well-versed in CitiFinancial's ongoing sleaze. Transparency is how employees are compensated, and in what CitiFinancial international(ly) is doing (and not doing: i.e., no "best practices" whatsoever) are absolutely needed. While these remain undone, announcements like last weeks at the 50th floor over Long Island City are far less than meaningful. Or, as Newsday (9/23) quoted ICP, Citigroup "is a predatory lender and that the new program will do little to make up for the company's past abuses. 'They still compensate Citi financial salespeople based on how much credit insurance they sell, which can lead to abusive practices,'" ICP says. Yep...

Update of September 15, 2003: a quiet Citigroup / CitiFinancial announcement, which for now we'll simply quote. Citi's response to the Office of the Comptroller of the Currency, which archly states that "one commenter discusses allegations in connection with a pending case in Tennessee," also slips in that "Effective July 1, 2003, CitiFinancial ceased offering optional personal property insurance in connection with its secured loans." Well, now. ICP Fair Finance Watch documented this practice to the Federal Reserve Board, and asked Sandy Weill about it at the company's April 2002 annual meeting; the Wall Street Journal finally got and reported Citigroup's answer (see, "Efforts by Citigroup to Reform Subprime Unit Raise Questions," Wall Street Journal, July 19, 2002)

When it makes a personal loan, CitiFinancial often asks the holders of personal loans to provide collateral. In some cases, according to CitiFinancial documents filed by Inner City Press, that collateral includes fishing lures and tackle boxes, record albums, tents, sleeping bags and lanterns -- items that CitiFinancial would almost certainly never bother to collect in the event of a borrower's default. Yet insurance is sold on the collateral in case it is damaged or lost.
"It's predatory: This insurance product has no rationale, because it's not credible that someone would want to have their loan paid with their leaf-blower," said Matthew Lee, executive director of the Fair Finance Watch project at Inner City Press. "Citigroup has not lived up to the subprime lending reforms it announced after acquiring Associates."
Citigroup officials concede seizing such collateral would be more hassle than it's worth. But they say providing such collateral on loans has a purpose -- "to make the borrower more responsible for paying the loan back," says Ajay Banga, Citigroup's business head of consumer lending.

The response was bogus at the time, and now fourteen months late, Citigroup says quietly that the product has been eliminated. We'll see -- and ask, whether any of these commitments apply to CitiFinancial's growing business outside the United States...

Update of September 8, 2003: CitiFinancial's predatory lending was on the CBS Evening News on September 5.... Meanwhile, a search of recent federal campaign contributions for "Prince, Charles O." reveals four contributions: two to "Shelby for U.S. Senate," and then the classic gift-split: $2000 to Bush-Cheney 04 Inc., and $2000 to John Kerry for President, Inc....

While the OCC has apparently still not asked Citigroup the type of questions other regulators routinely ask applicants, ICP submitted the following to the Illinois Insurance Department on September 8:

"Under cover letter dated August 25, 2003, ICP received a copy of a Form A application by Citigroup's counsel, dated August 4, 2003. It refers to an exemption request dated July 27, 2003 -- a copy of which ICP still does not have, despite its requests since August 4. A copy of the exemption request should be provided forthwith to ICP; it should not be ruled on, other than denied, until that happens, and ICP can be heard.

"Under cover letter dated August 28, 2003, ICP received certain exhibits to Citigroup's Form A. However, the affidavits provided are not of Citigroup's board of directors. In fact, the August 4 Form A states, under required Item 3, that "affidavits in the form designated in 50 Ill. Adm. Code 913 Illustration 1 will be filed as soon as they are available." Apparently, as of August 28 they had not been filed. Given the corporate scandals surrounding Citigroup and its board of directors (Enron, WorldCom, conflicted analyst advice, etc.), the requirements of biographical affidavits, etc., should NOT be waived. ICP will await receipt of the July 27 exemption request (which should be denied), and of the required biographical affidavits from Citigroup's directors."

Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of September 1, 2003: on August 29 we received Citigroup's much-delayed response to our comments of August 4, on Citi-Sears. Citi's response tries to argue that the predatory lending issues raised are "not related to the parties or the transaction." Meanwhile Citi reiterates that it would expand marketing of "insurance as well as consumer finance products and services" to Sears' customers.

Citi also states that it "does not provide public comments on matters that are the subject of litigation." Fine, then -- the OCC should simply deny Citi's applications until Citi is prepared to respond on relevant matters timely raised. Here's another, pre-litigation:

Subj: CitiMortgage has lost my wire

Date: 8/26/03 2:28:15 PM Eastern Daylight Time

From: [Name withheld in this format]

To: feedback [at] fairfinancewatch.org

I found your web site and am in horror of what CitiMortgage has been up to. On 8-5-03, Equity Title Company wired a loan payoff to CitiMortgage. CitiMortgage has still not applied the $ to my account, which is 21 days later. I have faxed them the copy of the wire confirmation, I've sent faxes, I've called numerous times, and no one will return my call or help me. I recently had applied for a home equity line after this loan was supposedly "paid off" and will not get this loan now. I have never been through an experience such as this and I'm beyond frustration. How can a company like this stay in business?!

It's called... campaign contributions! As to the business that Citi does through third parties, subprime and otherwise, Citi responds that it "review[s] resumes of principles of all third-party originators" (Resp. at 11). Rather than explain its basis for continuing to do business with the questionable subprime lenders ICP has named, Citi responds with generalities such as this. Somehow we doubt that a resume or c.v. would be the best source for potentially adverse information...

Update of August 25, 2003: Which is the bank that pays fines virtually every week? It's Citigroup, of course. There's predatory lending for $240 million; there's bogus stock analysts' advice (last week's development that Jack Grubman is still on the payroll, paid to stay quiet); there's Enron and, last week, there's Smith Barney unit being (under-) fined $1 million by the New York Stock Exchange for failing to supervise brokers who encouraged WorldCom Inc. employees to borrow money to buy stock in the now-bankrupt telecom firm when it was flying high. Also, August 21, a former executive of Citigroup Global Markets, Irving David, was indicted on charges he embezzled more than $70,000 US from two mutual funds he controlled. What a company! On Citi-Sears, the two do not even agree on what loans would be sold, or what the premium would be (see American Banker of August 21, at 5) -- and the Office of the Comptroller of the Currency either doesn't have, or hasn't released, this information. Nor has Citigroup submitted any substantive response yet. So ICP has requested an extension of the comment period from the OCC...

Update of August 18, 2003: In the Citigroup - Sears proceeding, ICP has submitted documentation of a sample CitiFinancial loan. The customer, who has authorized ICP to name her, is Betty Arnold. She and her husband Benny got a $140,013.60 loan from CitiFinancial on their marital residence. The CitiFinancial loan officer was Jack Lay -- he insisted on filling out the applications, including the insurance forms, himself. While the Arnolds disclosed that Benny had a heart condition, Jack Lay check off the "no prior condition" box on the insurance forms.

We have previously demonstrated, including in the exhibits to our first timely comment in this proceeding, that Citigroup pays CitiFinancial employees bonuses based on how much credit insurance they sell. This creates an incentive not only to hard-sell the insurance, but also to mis-fill out forms, as took place in this case.

Benny Arnold subsequently died of an aneurysm -- but Citigroup's American Health & Life Insurance Company refused to pay on the policy, despite the fact that the Arnolds had fully disclosed all prior conditions in the course of applying for and obtaining the loan and insurance.

Citigroup has had the opportunity to correct this outrage -- ICP has in its possession internal CitiFinancial documents reflecting their awareness of this loan and these issues, and that documentation has been made available to Citigroup and its outside counsel -- and still, the widow Mrs. Arnold faces foreclosure. All of these fact are attested to in the attachments we have now submitted to the OCC and Illinois Insurance Department -- along with Mrs. Arnold's phone numbers. So we'll see... Strangely, Reuters was unable to reach Citigroup, about its ATM outages in New York, even twenty hours after the blackout began. not a good sign...

Update of August 11, 2003: on August 6, Citigroup appointed Marge Magner head of its consumer business. It's not surprising: Ms. Magner's roots in consumer business go back to Commercial Credit, the subprime lender that subsequently acquired Travelers then Citicorp. What is surprising is how blinded the financial press is to the hard-lending roots of Citigroup entire top management team. Chuck Prince, Bob Willumstad, Marge Magner -- they all worked at Commercial Credit, presiding over high-rate loans to purportedly credit-impaired people. Ms. Magner used to give trainings, at Commercial Credit's headquarters in Baltimore, to all employees being promoted to branch manager (the so-called "Beam Me Up" meetings). At one held last one October, during a World Series involving the Cleveland Indians, a substantial number of the trainees were heard to groan as Ms. Magner went on for hours, Fidel-like, with the pablum about "Do the Right Thing," when the business model involved hard-selling useless credit insurance. And where is the financial press on this, a profile of the not-distant business experience of the top managers of the world's largest bank? Nowhere. "Thus do Enrons grow"...

On "http://www.innercitypress.org/citifile.html", while we await Citigroup's response to our "http://www.innercitypress.org/citifile.html", we've learned that Citi has been arguing to the Illinois Insurance Department that no application should be required, to acquire Sears Life Insurance Company, because insurance is "an insignificant part" -- the full language of the statute is "its insurance business either directly or through its affiliates is an insignificant portion of its total business." This seems strange, that the larger a conglomerate (and therefore the smaller a part its insurance business is), the less scrutiny would be given. We've requested all documents from the Illinois Insurance Department; also click "http://chicagobusiness.com/cgi-bin/news.pl?id=9724" for a "http://chicagobusiness.com/cgi-bin/news.pl?id=9724".

Update of August 4, 2003: on July 15, Citigroup announced its newest acquisition proposal, to acquire Sears, Roebuck & Company's credit card business for over $3 billion. In its usual blitzkrieg fashion, Citigroup filed its application with the Office of the Comptroller for the Currency, to acquire Sears National Bank, by July 25. Citi is asking the OCC to move quickly on its application, despite the fact that the proposal would expose more than 20 million more consumers to Citigroup's (and CitiFinancial's) practices. As quoted in the comments ICP filed on August 4, Citigroup intends to pitch Sears card customers with home equity and installment loans. Citi moves fast, so we must as well. ICP's comment is online in a "http://www.innercitypress.org/citifile.html"; this CitiWatch will continue...

Update of July 28, 2003: from the mail bag:

Subj: CitiMortgage Woes

Date: 7/22/03 2:59:54 PM Eastern Daylight Time

From: [ ]

To: CitiWatch [at] FairFinanceWatch.org

My husband and I had a mortgage for many years with First Nationwide Mortgage which was merged into (bought by) CitiMortgage, Inc. The transition took place last March 2003. What has transpired since that time has become a worse nightmare as each day goes by.

To make it short, they have and are violating RESPA, Fair Credit Reporting Act, Fair Credit Collections Act and numerous other federal statutes. Even though our case is being 'handled' by the President of CitiMortgage's office ("presidential investigation", they like to call it), we have received no return phone calls, no written responses to letters, including our "qualified written request" since May 15, 2003. (Today is July 22, 2003.) Our once perfect payment record is now a shambles despite continuing to make on time payments. They have made our payment and credit records a mess and refuse to communicate or to remedy their illegal actions. We cannot even refinance with another lender due to this.

We are not interested in class action suits that result in paltry slaps on the wrist of CitiGroup and nothing to remedy the damage that is being done to consumers (e.g., Morales, et al). My venture into looking for attorneys is done with trepidation. My first question to a law firm is if they have ever or are presently representing CitiGroup,

CitiFinancial, CitiMortgage, and/or any of their myriad entities. You wouldn't believe how many firms do not return my calls. Is everyone afraid of these guys? I've been reading with great interest your web site.

No (not everyone), and thanks for the kind words.

Update of July 21, 2003: much news on the Citi beat last week. First, Citi emerged as the winner -- we use that term loosely -- in the bidding competition for Sears' credit card business. Then, Citi's Sandy Weill announced he'll be stepping down as CEO, though he'll remain as chairman until 2006. His replacement? None other than Charles O. Prince, staunch defender of Citi's acquisition of Associates First Capital Corp. in 2000, and of CitiFinancial's (and Commercial Credit's) hard-charging consumer finance tactics before that. Financial journalists were in an uproar, personalizing, as they are wont to, the leadership of this trillion dollar behemoth. The Financial Times at least noted that "consumer groups have not always been complimentary" of Chuck Prince, quoting ICP that Prince "has been the point man to justify their problematic, high-interest consumer lending." The subsequent squib, that Citigroup is "ascendant," was meant sarcastically: it's certainly Citi's belief that it can overcome any and all compliance problems by making the right friends.

Update of July 14, 2003: Here's a sample letter we're received about CitiMortgage:

Subj: CitiMortgage

Date: 7/11/03 7:33:42 PM Eastern Daylight Time

From: [Name withheld pursuant to request - see below]

To: CitiWatch [at] innercitypress.org

Mr. Lee,

I found your site as I was searching for any suits brought against CitiMortgage for fraudulent PMI premiums. In late February of this year, my husband and I purchased a home. We chose Citigroup Mortgage Company to handle our financing because at the time I truly believed they were an honest company that was looking out for families like ours who wanted a home of their own and out of debt. I was even considering becoming an agent for them through Primerica and help other families become debt free. I even went as far as getting my insurance license.

When we received the "Pre-Approved" paperwork that we signed and sent back to them, it estimated our mortgage payment at about $850.00 a month. This included the PMI, which was estimated at $77.00. I understand the need for the PMI as my husband and I were purchasing the property with no money down. The property we purchased consist of 4 lots in all and is zoned for Commercial. There is 40x45 commercial building that we purchased with the house. The appraiser, which Citigroup provided, estimated this property at exactly the amount we were purchasing the property for. I was not concerned about this at the time; I was actually happy. Now that I see things looking back, I can see why they would not want it to appraise for more. It puzzles me that a property of this size with both buildings appraised at $16,000 less than the original asking price. It took 3 WEEKS for the appraiser to bring back comps to the company that the underwriter would accept. I was told by the loan processor that the original comps were coming in too low!!! I can not understand this. All in all, I was repeatedly reassured by the representatives of the mortgage company that everything would be fine.

Once we arrived at the closing, which was pushed back by 3 weeks due to various delays, we found out that our monthly payment jumped $200.00 from the originally estimated amount!!!! We were NEVER advised through the two months that we worked with this company of this change. If we had, we would have clearly opted to not purchasing the house! In fact, with the closing date being 3 weeks overdue, we had already signed the offer, and not knowing this information until the time of closing, my husband and I found ourselves backed into a corner. We were made to believe by the realtor that if we did back out at the closing table that there may be some legal ramifications from the seller! Needless to say, my husband and I did sign and now find ourselves with a mortgage payment that we clearly can not afford.

It turns out the reason for the tremendous increase in payment was due to the amount of the PMI insurance jumping from the $77.00 originally estimated to $271.00!!!! The mortgage company states that the original estimate on the "pre-approval" paperwork did not take into consideration our credit criteria. Now, I ask, how can you "pre-approve" someone for a $78,000 loan without first considering their credit history? I have since researched and now realize that this insurance is based on the loan to value ratio, the type of loan, and the type of coverage required by the lender. It has nothing to do with our income or credit rating. In addition, PMI premiums should typically cost between 1/2% to 1% of the loan. In our case that would be $780.00 a year at the most. We are paying $3,252.00 a year by my calculations! Over the length of a 30 yr loan, they could potentially earn $97,560.00! That is more than our original loan, not to mention the 8.125% interest rate!

Citigroup excused themselves of doing any wrong by stating that they have no control over the cost of the PMI because it is set by the insurance company. That is very interesting, seeing how Citigroup is the parent company of Travelers Insurance! It would not surprise me if Traveler's is, in fact, the insurance agency handling the PMI! In addition, I believe the appraisal was intentionally brought in at the purchase amount in order to force the need for PMI? I find it hard to believe that our property is not valued at at least 20% more than what we purchased it for. In the past few months since our purchase, I have seen quite a few properties that were of small size and on smaller lots sell for more than we purchased our home for. The sellers were happy to sell it for what they could get because it was part of an estate and they were about to lose the property for back taxes due.

I have contact my State Legislator and his office has been very expeditious in investigating the matter. Unfortunately, this may not help us and the financial strain it has caused, but I hope that it prevents other families from being taken advantage of by Citigroup. They are truly a wolf in sheep's clothing!

I encourage your readers to contact their state officials and take any opportunity they can to publicize the underhanded practices of this company.

I request that you keep this anonymous, as the possibility of taking legal action against Citigroup is still being investigated.

Will do; good luck.

Update of July 7, 2003 -- This week: Citi sued by its employees, then (CitiFinancial) news from all over. Former Salomon Smith Barney brokers who were made to forfeit their Capital Accumulation Plan (CAP) deferred compensation plan contributions when they left Citi have won class certification. The U.S. District Court in Boston, which is overseeing all of the CAP cases filed at the federal level, certified a New York class. The court then denied Citigroup's motion for reconsideration. The next step is notice to the class -- this is not a "friendly" class action, like the predatory lending "Morales" case in California. In the New Jersey CAP case against Citi, the plaintiffs have succeeded in getting the trial court to grant them the right to take Sandy Weill's deposition. That decision is being appealed by Citigroup...

Meanwhile, Citigroup takes high-rate lending worldwide. Latin Trade reports that CitiFinancial is charging interest rates of 40% in Brazil... The Chicago Tribune of July 6 reports that "three Chicago fraud rings were able to obtain fraudulent mortgage loans from CitiFinancial, the sub-prime lending unit of Citigroup, from offices in Chicago and Cicero, Bilyk says. The bogus loans, which Bilyk says were secured with help from an insider, resulted in at least a $2.2 million loss to CitiFinancial. 'CitiFinancial takes all incidents of fraud very seriously and works hard to eliminate any improper activity,' says CitiFinancial spokeswoman Maria Mendler." Why don't we believe that? (Well, see below on this page).... The Chi Trib of June 29 reported that " Sandy Weill and executive committee chairman Robert Rubin received nearly $500,000 combined in "company transportation" benefits last year; Rubin's employment agreement guarantees him access to company aircraft for personal use"...

Update of June 30, 2003: From Crain's Investment News of June 23: "'The higher-net-worth clients naturally gravitate to our model because of the sophistication of the products and because of the access we can provide to Citigroup at large,' says Damian Kozlowski, head of Citigroup's U.S. private bank." Yeah: that'd be Salinas, Sani Abacha, and even higher net-worth customers.... On June 23, NYC Comptroller William Thompson said that the city's five pension funds might cut their relations with Citigroup, over a potential $89 million loss from a bond investment. It is also unresolved whether Citigroup may step in and compensate the city for some of those losses, Thompson said. "I don't know yet," he said. "We'd like to resolve that fairly." The bonds were backed by now-collapsed health care financier National Century Financial Enterprises Inc. The company filed for bankruptcy protection in November 2002. Citigroup's Citigroup Securities Services unit was involved in the deal, a company spokeswoman said. The company had no other immediate comment... But Citigroup did issue a press release on June 24, bragging that its "Citibank, Global Corporate and Investment Bank, and Global Investment Management locations in the United States have adopted 30 percent postconsumer recycled copy paper." Interesting that CitiFinancial wasn't listed. Even it had been, it'd be predatory lending on environmentally-sensitive paper...

Update of June 23, 2003: In light of recent announcements by Citi that it is working with community groups, giving them "face time" (or in some cases, just money) -- and claiming, as CitiMortgage's John Hummel did to DJNS on June 12, that these deals weren't "in response to any litigation or customer complaints" -- consider the following, from this week's mail bag:

Subj: CitiFinancial mortgage

Date: 6/16/03 4:38:08 PM Eastern Daylight Time

From: [Name withheld]

To: CitiWatch [at] innercitypress.org

...Our mortgage was with Associates and was sold to CitiFinancial. Since then I have become terminally ill and of course my income dropped dramatically, we contacted CitiFinancial to make them aware of the problem I asked to have the house refinanced to get a lower rate and they refused when the mortgage got behind they promised a deferral on the payments and after much paperwork they told us everything was approved and we were ok, then they wrote us approximately 4 to 6 months later saying we were behind again and that the deferral didn't go through, so we tried a deferral again with the same results a few months later, this same cycle has taken place 4 times since 1999 culminating in a phone call today 6/16/2003 notifying us that we are 128 days behind ( by our records we are only approximately 70 days behind ), and because of this they are starting foreclosure proceedings, we tried to refinance the house with another lender in 2000 but CitiFinancial refused to give the other lender a pay-off amount so they said they couldn't help us, we have made repeated attempts to rectify the situation

* * *

[Another message from last week]...I am in Ohio and am having a problem with Citi bank to the fact that I think a class action suit may be necessary. I liked your web site information and the information provided was invaluable to me. Let me explain. We have a Key bank card that is held by Citibank. We have always paid on time, paid more and have a great rating among any one we have ever worked with. Our car lease is paid 3-4 months in advance, our house payments are paid two months in advance. We don’t have multiple credit cards and only have this card and one other. That’s it. We received a note in the mail stating that Citi Bank was raising their rate to 18% citing excessive debt. BUT!! Our other credit card company has kept us at 7 ¾% and we have a 0 balance on the other card as well as the Citi bank card as of last week. We don’t have any other debt. We are in the process of obtaining the credit reports. I have a sincere feeling that this is a ploy by Citibank to raise the rates. Even the person at Citibank in the executive offices said that I was an excellent customer and he did not understand it either. He offered to keep me at the 7 ¾% but what about the other people consumers that are faced with this same situation??? I called the bank here in Ohio and they gave me a rude snot at Citibank that was verbally threatening that he would go ahead and take my account and close it. Well I will close it on my own... Your information gave me the inside trac[k that] Citibank that has become this "monster in the industry" just thinks they can walk over anyone at any time with no regard for anyone...

And the CitiWatch continues...

Update of June 16, 2003: According to the Rating of Corporate Directors released June 9 by TCL, Citigroup has the least accountable board of directors in the United States. "CEO Sanford Weill was personally involved in one of the most outrageous scandals of the most scandalous year for American business since the 1929 stock market crash... Citi, like its peers, has had to pay a massive fine and Weill himself must be accompanied by a lawyer when he speaks to the analysts who work for him. But for Weill and the board, it looks like business as usual, and Weill and the board have demonstrated no personal accountability. The fine was almost entirely paid for by Citi's current shareholders (and the shareholders of Citi's insurers). At a minimum, it would be fair to expect Weill to take a hit in pay." TCL's editor told the N.Y. Daily News (June 10) that Those payments suggest the board is "operating as a wholly owned subsidiary of Sandy Weill Inc," said Minow. "I don't know that there's anybody on that board that's capable of saying no to him." Always a bad sign...

Meanwhile, the FT of June 16 quotes the head of Citigroup's global investment management business, Tom Jones (no, not that Tom Jones) as opposing spending anytime on shareholders' activism on corporate governance issues. "I've got to say that I've got higher priorities. I'm not a do-gooder. I want to do what I get paid for, and shareholder activism isn't what I get paid for."

At CitiFinancial, they also "do what they get paid for" -- packing credit insurance in loans, converting unsecured sale finance contracts into mortgages and otherwise gouging unsuspecting customers. And, CitiFinancial has just taken its predatory ways to Quay Parade, Swansea in the UK, per South Wales Evening Post of June 10, 2003... On the environmental front, Citigroup Venture Capital has been exposed as the largest shareholder, with a 75% stake, in Mincorp Acquisition Corp., whose mining operation at Quecreek last year unleashing a torrent of water that trapped miners 245 feet underground. Citigroup (and its various environmental partners) have been very quiet about this one... It's not "project finance" -- it's a direct investment...

Update of June 9, 2003: This week: environmental pieties, predatory reality. On June 4, Citigroup and nine other global banks announced reforms to their project finance lending, adopting a vague set of "Equator Principles" -- the World Bank offered praise; environmental organizations put forth a mix of praise and critique. Citigroup's Chuck Prince said-in-statement that the Principles are "a major step forward by the financial sector to address the environmental and social issues that arise from development projects."

We can't help noting that this is the same Citigroup (and the same Prince) long refusing to adopt any standards regarding which high interest rate loans they buy, securitize or otherwise enable. When the issue was raised, Mr. Prince said that Citi was akin to a pipe or a wire, through which the loans flowed. Strange, then, that Citi would so loudly claim to be considering the environmental impact of its project finance loans. We will be revisiting this...

From predatory lending land (in this case, CitiFinancial's Broadway office in Knoxville), at press time we received dozens of new pages, including ROCopoly print-outs from Citi's Maestro computer system, showing that CitiFinancial continues to base employees' compensation on how much credit insurance -- on personal loans, explicitly including single premium credit insurance -- they sell. There is also a break-down, by branch, of sales finance conversions, and rah-rah talk from sample branch manager Jim Chakales: "We have 62 of 100 POT 30's not set, how can we let this happen gang we have some with no activity since 5/12. Tim are you reviewing work list?? Team where is the pride and commitment Jim." Where indeed...

Update of June 2, 2003: Last week Inner City Press obtained from the Connecticut Attorney General's office a lengthy complaint against CitiFinancial -- a sad saga of rip-offs culminating in CitiFinancial passing the loan over the Fairbanks, the much-sued subprime servicers. The Citi - Fairbanks connection bears further elaboration (before Fairbanks, like CitiFinancial, tries to buy silence, perhaps finding amendable lawyers to file a class action they can settle-on-the-cheap). Speaking of that, an update: appeals have been taken from Judge Kramer's rubber stamp approval of CitiFinancial's settlement-on-the-cheap in the Morales case... Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of May 26, 2003: In the May 26 edition of "Inside B&C Lending," Citigroup offers an update on its supposed anti-predatory lending safeguard, the "referral-up" of creditworthy applicants to normally priced. loans. In 2002, of the over twelve thousand applicants "referred up," less than a thousand actually applied and less than 300 loans were made. Citigroup calls this a "warm" referral process -- ostensibly somewhere between cold (a mere 1-800 number) and "hot," which would involve the obvious step of offering normally-priced loans to those entitled to them, in the CitiFinancial storefront or elsewhere. The same "Inside B&C Lending" article questions CitiFinancial's most recent "partnering" announcement, stating that it "appears to contain little new," and that work on the "affordable mortgage" product "is still in the very early stages."

A view: Community Reinvestment Act-style "partnerships" are not necessarily the way to address nationwide predatory lending. CitiFinancial refuses to significantly reforms its practices, but wants to "partner" (i.e. silence) particular organizations. Don’t blame the groups -- blame Citigroup.

Back in the real world (of CitiFinancial's practices): another snapshot from Tennessee -- a borrower (make that victim) of CitiFInancial's Morristown office has been asked to pay on a loan that he never took out. This one, an equity wrap, was an outright forgery, which new region manager Michael Wyatt has committed to look into... Update: on Citi's predatory lending, see Mike Hudson's excellent exposé, online "http://www.southernstudies.org/" (full "http://www.southernstudies.org/") and "http://www.southernstudies.org/reports/bankingonmisery.pdf" (main report, in pdf format).

Update of May 19, 2003: Delayed Documents Display Citigroup's Dominance of its Regulators: last week we received from the Office of the Comptroller of the Currency a response, dated May 12, 2003, to our FOIA appeal of February 12, 2001. That's not a typo -- it took the OCC more than two years to respond to a FOIA appeal. The underlying request concerned "http://www.innercitypress.org/citiafcc.html". Among the documents provided on appeal -- several hundred pages that were improperly withheld back in 2000-01 -- were OCC emails showing the endgame just before the OCC approved Citigroup's application. On Nov. 28, 2000, OCC general counsel Julie Williams sent out a message: "Fire drill. I talked with Jerry about the timing on Citigroup and he wants us to try to get done by sometime on 11/30. So, I need a decent draft of the whole decision to take home on Wednesday evening." The "Jerry," it seems clear, is Jerry Hawke, now as then the Comptroller.

At 1:56 p.m. on November 30, Ms. Williams got an email stating that

"Jerry has not provided me or Greg comments... I have not caught up with Barbara Kent (NY State Banking) yet to find out if they're on for a 2 pm approval. We have traded messages several times. However, I heard from FRB folks (who have a Reg K approval on this deal) that [REDACTED]. Carl Howard [Citigroup lawyer] just called... He says Barbara Kent is meeting on an 'exclusive' basis with the Wall Street Journal right now. She won't be doing a press release today, but he says 'We believe the decision will still occur at 2, as she said it will.' He's not sure when a document will be made public today or tomorrow. He expects to get a letter today, however. It's going to be 1 sentence and she's read it to Carl. I asked Carl to let us know when NY acts.

"The FSA (England) closed its office today without approving this; they are expected to act tomorrow at 10:30 am. They hope to do the closing at 5:30 US time) on Friday. They wouldn't act without the FRB acting. The FRB said staff could approve once they had the non-objection letters from the FDIC and OCC. Ray was called by Prince and Sweet and had me in on the call. They asked us to speak to FSA about our timing but the office had closed when they tried to patch us in. FRB staff also had had a number of conversations with FSA about all of this, but couldn't comfort them."

What does it all mean, you ask? Well, Citigroup "closed" / consummated the deal at 5 p.m. on November 30. From the above OCC email, three hours prior to that (stating that the FSA has closed for the day), it now appears that Citigroup closed the deal without the required FSA approval (or perhaps they reached a regulator at home). The agency's collaboration with Citigroup -- being "managed" by Citigroup's Carl Howard, being "patched in" to the FSA by Citigroup's Chuck Prince and outside lawyer William Sweet -- is troubling. So too are the OCC messages quoting from ICP e-mails the OCC obtained from recipient the OCC calls "confidential sources," and various requests to withhold these communications (resulting, it appears, in the more than two year delay). Like we said, better late than never. Though just barely....

Update of May 12, 2003: Last month, Citgroup quietly started-up a consumer finance operation in Brazil, under the CitiFinancial name. Business News America of May 8 states that CitiFi Brazil will "target lower-income segments of the population."

The revolving door grows faster and more nauseating: last week, Citigroup scooped up Richard Ketchum, the president of Nasdaq. Buying credibility? It'll take more than that.

Update of May 5, 2003: Citigroup on May 2 disclosed that it is in talks with U.S. securities and bank regulators about a previous transaction with power company Dynegy Inc. Last September, without admitting or denying wrongdoing, Dynegy agreed to pay the government $3 million to settle charges of improper accounting related to "Project Alpha." Citigroup helped create Alpha, which helped Dynegy artificially boost operating cash flow by $300 million. "As part of Citigroup's discussions with the SEC and bank regulators relating to certain of its transactions with Enron, Citigroup is also involved in substantive discussions with the SEC and bank regulators regarding one of its transactions with Dynegy," Citigroup said in its quarterly report filed with the SEC. The "bank regulators," one would think, include the Federal Reserve -- where Citigroup's (ex-IMFer) Stanley Fischer is being considered to head the Federal Reserve Bank of NY...

Tennessee update: in the run-up to Douglas Bacon's day-in-court against CitiFinancial, slated for May 19, Mr. Bacon has obtained the insurance training scripts (a/k/a/ the "how to con customers into credit insurance" scripts, quoted from below on this page) and other documents that reflect how he and other applicants were treated. Should be interesting....

Update of April 28, 2003: While Citigroup makes moves on China, it continues its predatory lending, at home and abroad. On April 25, Citi announced a deal allowing it to buy additional shares in Pudong Development Bank and its 272-branch network. Citibank paid $72.5 million for a five percent stake in Pudong bank; the new deal allows additions thereto every April, up to 25%, Citi spokeswoman Grace Guo said in Shanghai. "We'd make a decision when the time comes, whether to go ahead if regulations permit. We'll take it step by step," she said. Hey, if the past is any guide, Citigroup makes the regulations (for example, the repeal of the Glass Steagall Act in 1999). Then when things turn bad, they're nowhere to be seen (but watch for Sandy in the SEC settlement: according to some, he'll be barred from speaking to stock analysts without a compliance officer / handler).

On the predatory lending front, last week Inner City Press received documents and a cover letter from a whistleblower within CitiFinancial. First, the letter:

"As a long-time employee of CitiFinancial, formerly Commercial Credit, I can personally testify that while CitiFinancial appears to be [getting] in compliance with the Federal Trade Commission, it couldn't be further from the truth. CitiFinancial's claims that the bad rap came from Associates [First Capital Corp.] is a bunch of BS. CitiFinancial continues to target subprime borrowers charging ridiculous rates, as high was 34% (even on "Excellent" risks). They are still flipping or RBO-ing loans... Home Office mails out 'pre-approved' loan vouchers that aren't really pre-approved and bank drafts at lower APRs than what we offer in a branch and then proceed to solicit these unknowing souls and all they did was deposit a check in their bank account! Now to the biggie, retail sales accounts. Once that account is in a branch, the customer better move, change their phone number to non-published and possibly change their name because we are going to call them, mail them, call them again etc. etc. etc.. Flipping a sales account to a personal or equity counts big on ROCOpoly (if you get all of the Quik Plan points, a gain, minimum $ per K and so on)...

CitiFinancial's code of ethics is a joke, since most in management do not, in any way, shape or form abide by it. Take Joe Perdue, regional manager -- he harps on 'upselling' a customer if they qualify for an equity loan even though they may need a smaller amount -- I have enclosed some reading material for you that will back up my allegations.

Attached to the letter were twenty-some pages, including a CitiFinancial memo to branch managers, dated February 28, 2003, stating:

"You may or may not have noticed that your personal loan credit authority has been reduced to $5,000... Any personal loan where the credit approval exceeds your authority you are to refer to me for approval. The purpose is to stimulate Equity Plus business. Do not send an application where the customer is a homeowner to home office credit for approval. I want to review those applications myself. Make sure your staff understands. If the customer qualifies for an equity plus loan I should see notes reflecting their conversation on the sale of that product. If I do not see, the loan will not be approved until the employee has made a sales presentation to the customer for a larger loan paying off debt and building the loan to an equity plus basis... I expect and will inspect for compliance."

This means that CitiFinancial blatantly seeks to get a lien against an applicant's home, even if the applicant states that he or she only wants a smaller, unsecured loan. This is the "compliance" that CitiFinancial "inspects for." CitiFinancial remains a predatory lender...

Update of April 21, 2003: Annual shareholders' meeting generally, and Citigroup's in particular, have become a charade. At Citi's Carnegie Hall shindig on April 15, Sandy Weill stood alone on stage. It stunk of the cult of personality. No other Citigroup board member spoke; Sandy smugly defended Citi's ten million dollar bonus to Robert Rubin. Various corporate flunkies -- if not to say groupies -- spoke up pro-Sandy in the Q&A.

Sandy began, however, by showing a slick video about Citigroup's love of communities and of the environment. Featured were quotes from Conservation International, and the head of Habitat of Humanity. Then Evelyn Y. Davis spoke at length about how Sandy and his wife Joan are her friends, that she doesn't care of the various allegations of corruption at Citi are correct. Sandy solicitously allowed her to rant. This is not only a matter of civility: the effect is to make subsequent speakers seem similarly like cranks. Sandy sang "My Country 'Tis of Thee" and praised U.S. troops overseas. He defended the use of derivatives, citing with approval the Fed's Alan Greenspan. Sandy denied that the government had done anything to bail out Long Term Capital Management, other than lend its office space. Five pounds of propaganda, including a report on Citi's "Real Estate Lending Initiatives," were handed out in the hallway. On stage, Sandy claimed that Citigroup is a leader, and offered up Bob Willumstad to talk to victimized borrowers. No mention was made of Citigroup's extensive lobbying against state and local anti-predatory lending legislation; no justification was given for the fact that CitiFinancial's few reforms do not apply to non-real estate loans, nor to CitiFinancial's growing (and predatory) operations outside of the U.S.. In the back of the theater, Citigroup's new CRA officer Jeff Jaffe pointed out that the hard-selling business model of electronics retailer Crazy Eddy's (and its successors and peers) is not illegal. By now, the Q&A had degenerated into longwinded defenses of Robert Rubin, and pledges of allegiance to Sandy. When he retires, how will these meetings be run? Regarding Citi's annual shareholders' meeting, see also ""http://www.newsday.com/business/printedition/ny-qzli163222491apr16,0,5241874.story?coll=ny%2Dbusiness%2Dprint","New York Newsday, April 16, 2003.

Update of April 14, 2003: This week, silenced CitiFinancial victims, and Citigroup seeks to control the Federal Reserve, while leaking senior employees to Bank One.

In the endgame of Citigroup's attempt to settle on the cheap with the Federal Trade Commission, via the Morales class action, Citi is maintaining that any class member whose "opt out" arrived a few days later must be included in the case, and give up their rights in exchange for barely $100. Consider the tale of Donald Lee Barriger of Indiana, who wrote to the court in San Francisco in time, stating that he was seeking legal advice on whether to opt out, then subsequently opted out. Citigroup seeks to keep such consumers unwillingly in the case; the FTC and putative "plaintiffs" lawyers say nothing. At the claims-processing company Gilardi, he reached nothing but an answering machine; Mr. Barriger's calls were not returned. He called the plaintiffs' lawyers, without satisfaction. Mr. Barriger initially got his high-rate loan at IMC Mortgage, later it was transferred to Associates First Capital, then to CitiFinancial. The loan was flipped three times, each time with the payment of $6500 in single premium credit life insurance. No premiums were refunded. He wants and has tried to opt out, to no avail. This Citigroup - FTC/Morales settlement is not, as was reported, a making-whole of consumers. And because of the lack of injunctive relief, CitiFinancial continues gouging consumers...

At a different if not higher level, the exodus from Citigroup to Bank One continues: last week Bank One announced that Citigroup's co-general counsel Joan Guggenheimer is jumping to Bank One at the end of the month...Reuters of April 11 quoted "sources close to the Fed" that the search for a replacement for Bill McDonough as president of the New York Fed has zeroed in on Stanley Fischer from -- where else? -- Citigroup. Supporters of such a selection would focus on Fischer's tenure at the IMF. But is the revolving door and interpenetration between the Fed and Citigroup become outrageous? It is. For example, Sandy Weill is on the board of directors of the New York Fed. While even the NYSE had to step away from its proposal to put Weill on its board, the Fed keep him on, and presumably would continue to, even if Weill's IMF trophy Fischer became president of the New York Fed. Forget "too big to fail" -- it's now become "too big to not capitulate to." Weill, by the way, "will review Citigroup's first quarter results via teleconference and live webcast on Monday, April 14, 2003, at 11:00AM." The date was moved up, now one day before Citigroup annual shareholders' meeting, on which we'll report.

Update of April 7, 2003: The sleaze of CitiFinancial never ceases to amaze. Last week Inner City Press obtained documents of a CitiFinancial credit insurance sales training session. The word insurance is never used; it's called "protection." Employees are exhorted to sell as much credit insurance as possible: "Every contact a sales opportunity-- sell the financial solution, the delinquency solution, the protection program. 100% documented presentation of available products is the ONLY ACCEPTABLE Performance level." Becoming more specific, the CitiFinancial presentation states that "Protection sales at maximum level can make or break your effort. One $7500 net personal loan can produce $1,190.91 income in the month booked." That'd be insurance premiums. CitiFinancial measures any credit insurance not sold as a missed opportunity: "PL Insurance sales - $17.00 below criteria.. 84% of objective. EquityPlus Insurance -- $4.70 below criteria.. 62.7% of objective... Total cost of missed insurance income opportunity $3,476,873 -- $46,984 average per branch!" These figures come from the State of Tennessee, where last week customer Douglas Bacon filed suit against CitiFinancial, among other things for insurance packing. This case has been brewing: Mr. Bacon sent CitiFinancial a registered letter requesting copies of the documentation of his second mortgage and also instructed them to stop calling and harassing him. Branch manager Tim Harrison refused to send the loan document and employee Kristi Harper nevertheless continued to call Mr. Bacon. After some time, Mr. Bacon received his documents and has filed suit. Among the questions raised: difference in signatures and dates and why CitiFinancial sold Mr. Bacon life and unemployment credit insurance on the larger loan, but disability and unemployment credit insurance on the smaller loan. The answer, sources say, is that CitiFinancial targets its insurance packing to whatever the most profitable product is, on each type of loan.

Update of March 31, 2003: Reuters of March 27 reported that Citi's Kevin McCaffrey is under investigation by the NASD for failing to supervise ol' Jack Grubman. McCaffrey was shuffled to another Citigroup unit. Reuters reports that "McCaffrey's assistant referred a call to Citigroup spokeswoman Leah Johnson, who declined to comment." Typical.. Meanwhile, at the International Money Laundering Conference in Miami last week, Citi's global money laundering director, Richard Small (yes, the ex-Fed regulator), complained that "It's somewhat stressful to gear up for something when we don't know what it will look like when it comes out." He speculated, in the nature of lobbying, that banks will have to police travel agencies, jewelers and other non-financial businesses that may fall under money laundering rules.

Update of March 24, 2003: Business Week reported -- well, speculated -- last week that within two or three months, Citi will announced a deal for one of three banks: Fleet, Chase's Texas Commerce, or Cullen/Frost, also in Texas. Well, on March 19, Japanese regulators announced that the Tokyo branch of Citigroup affiliate Nikko Salomon Smith Barney will be barred from stock trading on its own account for 20 business days as punishment for manipulating share prices. On March 21, the New York Stock Exchange blithely nominated Citi's Sandy Weill for election to the NYSE's board of directors. Apparently, the Martha Stewart fiasco, including her resignation from the NYSE board, taught the NYSE honchos nothing. By March 23, ol' Sandy'd had to withdraw his name from consideration....This came a week after Carnegie Hall gave itself over to Sandy's birthday party, where is was toasted by Sen. Chuck Schumer, Chuck Prince, and that great businessman Frank Newman, who ran Bankers Trust into the ground then made off with several lifetimes of Deutsche Bank's money...

Update of March 17, 2003: this week, more overseas scandals. On March 13, Citibank Belgium preemptively announced that the Belgian authorities were examining whether it helped clients evade taxes via its branch in Luxembourg. Belgian investigators searched Citibank's head office and three local branches on March 12, a spokeswoman for Citibank Belgium said... On March 16, the Bahrain Monetary Agency disclosed that Citigroup withdrew billions of dollars from the Gulf Arab state late in 2002, leading to a sharp drop in assets of offshore banking units (OBUs) operating in Bahrain... Questioned in Washington on March 14 was a Skadden Arps lawyer who's represented Citigroup, Andrew Sandler -- he's calling for federal law to preempt those pesky states and cities on the issue of predatory lending. When asked a question about Citigroup's current practices -- which include arbitrarily-set interest rates, and compensation paid to employees based on how much credit insurance they sell -- Mr. Sandler says he can't speak for his clients. So who can?

Update of March 10, 2003: Sales finance is a side of CitiFinancial's business that's rarely covered. Here's a sample complaint from North Carolina from late September 2002 -- just after CitiFinancial announced its settlement with the Federal Trade Commission:

I entered into a contract with Furniture Warehouse... CitiFinancial is the financier for Furniture Warehouse. Under the section entitled "Special Financing," it states that if the contract is paid within 360 days of the contract, there will be no finance charge. It was represented to me by Furniture Warehouse that the agreement involved no interest for one year. [Within a year of the purchase, I made the lump sum payment.] I was then told that the payoff exceeded $500.00. This is when the dispute began... I contacted Ed Mayhew, Manager, CitiFinancial, by mail... At some point, Mayhew called my home, and informed my husband that he was going to sue me. He filed a small claims suit... I appeared at small claims court at the appropriate time, fully prepared to defend my case. Neither Mayhew nor any representative of his office or company had the courtesy to appear... Last year, my credit score was a respectable 719. Now, I am attempting to get a loan, and my financier tells me my score has dropped to 586... As a result the loan has been denied.

The response to this complaint -- dropping the interest charges without apology -- comes from CitiFinancial's Baltimore-based associate general counsel T. Eric Garrison.

Jump-cut to Tennessee, with a more "insider" view of a dirty loan. At the CitiFinancial branch on Broadway in Knoxville, employee Kristi Harper racks a customer twice for credit insurance. To the first mortgage, she adds credit life and unemployment insurance. To a subsequent second mortgage, she adds credit disability and unemployment insurance. No explanation is given why the customer would leave credit life on the first loan, and switch to credit disability on the second. Actually, the customer's signature has been forged, and informed sources say it’s the handywork of Maye Maughm, previously named in this CitiWatch Report. And the beat goes on...

Meanwhile in Tokyo, Japan's Securities and Exchange Surveillance Commission on March 7 recommended penalties against Citigroup's Nikko Salomon Smith Barney for manipulating stock prices..

Update of March 3, 2003: Who's shrouded in secrecy? Why, Citigroup, of course. This week we have two denials of Freedom of Information Act appeals, from the Federal Reserve Board and the Federal Trade Commission. On Feb. 24, the FTC sent Inner City Press two documents: its legal brief defending the narrow settlement of predatory lending charges with Citigroup, and a five-page FOIA appeal denial by FTC general counsel William Kovacic. He states that "[a]ll of the documents responsive to your amended request are protected by FOIA Exemption 7(A), which protects information compiled for law enforcement purposes the release of which could reasonably be expected to interfere with enforcement proceedings." Mr. Kovacic refers to "an ongoing Commission investigation... Although the parties have reached a provisional settlement agreement in the matter, it is still open because the settlement is contingent upon the certification and approval of a nationwide class action pending in California state court, Morales, et al. v. Associates / Citigroup."

ICP has sought the documents in connection with the fairness hearing in Morales. The FTC's position is a Catch-22: it will not release the documents until the proceeding they were requested for is over. The same day, the FTC submitted a brief purporting to respond to objections to the settlement, but not mentioning its denial of access to "five boxes" of documents related to the case and settlement...

Meanwhile Federal Reserve Governor Susan Schmidt Bies has denied access even to the transcripts of its interviews with three ex-CitiFinancial employees in Knoxville, Tennessee on October 9, 2002. Nor has the Fed given the deponents copies of the transcripts, despite statements on Oct. 9 that this would be done. For this, Gov. Bies cites FOIA exemption 8; under exemption 4, the Fed is withholding "three linear feet" of responsive documents.

The upshot? It's good to be under investigation. Particularly by agencies that reach weak settlements (that's be the FTC), or that consider you too-big-to-fail, even, too-big-to-disclose-information-about.

Update of February 24, 2003: on Feb. 21, Inner City Press received a copy of the response to its and others' objections to Citigroup's proposed settlement-on-the-cheap of allegations of loan flipping, in the Morales case pending in California. ICP's objection is summarized below on this page; here are some quotes from the plaintiffs' lawyers response, essentially in defense of CitiFinancial:

"The Inner City Press / Community on the Move objects to the proposed settlement primarily because it does not include injunctive relief to ensure that the same 'packing' and 'flipping' practices at issue in the litigation do no continue or reoccur. Specifically, the objector contends, there is no assurance that the predatory lending practices at issue in the litigation will [not] continue, under the CitiFinancial name, unless the settlement includes an order for injunctive relief... Plaintiffs respond that the primary injunctive relief sought by the litigation, an order enjoining defendants from engaging in deceptive solicitation and/or sale of loans or add-on products, was satisfied in advance of the parties' settlement. Specifically, since the acquisition of The Associates in November 2000, Citigroup, Inc., has voluntarily adopted a series of consumer-oriented initiatives that address concerns raised by Plaintiffs, the FTC and others regarding The Associates' credit insurance and refinancing practices. As the $240 million settlement was obtained in conjunction with a voluntary adoption of a 'best practices' policy by Associates' successor, Plaintiffs respond that the proposed settlement is fair, adequate, and reasonably considers the injunctive relief obtained."

So -- here you have a slew of class action firms saying that Citigroup's non-binding and weak "voluntary" reforms are enough for them. Question: will they enforce Citigroup's compliance even with these its vague promises, which in any event are limited to real estate loans? Somehow, we doubt this. This is take-the-money-and-run time. In a separate brief, the plaintiffs' lawyers defend their proposed $23 million fee (for a $25 million flipping settlements -- $120 per victim). The Morales Plaintiffs' lawyers refuse to respond to ICP's critique of the fee, stating that only Class Members can raise this issue. Then, without further documentation, they state that Citigroup "acknowledged the substantial contribution that Plaintiffs made in connection with their settlement with the FTC by stating to the mediators that at least $100 million of the $215 million settlement with the FTC was attributable to Plaintiffs' Counsel." (Fee Brief at 24). First, they should be required to put in an affidavit for that statement. Let Citigroup "acknowledge" it in writing, and then allow cross-examination. Our guess? Citigroup was willing to pay more to the FTC so that it could get the abusively broad release of claims by victim that this $120-a-head settlement provides.

Though we rarely do this, in light of the Plaintiffs' lawyers' "standing" argument, we leafed through the fee affidavits that were attached. The lawyers set their fees at up to $690 an hour -- this firm seeks to charge $190 an hour for a paralegal, and $155 an hour for a "Summer Law Clerk." Another firm charges $875 for two-and-a-half hours of "[e]xtensive internet investigation of allegations that Citigroup has been involved in predatory lending practices." [Note to reader: you should get paid, apparently, for reading this ICP Citigroup Watch Report.] The firm also charges $350 an hour for travel time -- e.g., $1,400 for "returned from San Francisco." Many of the firms' charges are mostly for work after the Settlement was announced. That is to say, they're getting paid for defending their fees. They're getting paid, $350 an hour, for surfing the Internet. It's sure nice work if you can get it...

On the now-key question of the Plaintiffs' lawyers' collaboration with the FTC, they've put in an affidavit by William P. Butterfield. In paragraph three, it begins to say that "at the FTC's request, I and other Milberg Co-Counsel provided substantial assistance to FTC counsel be, among other things, 1) provided documents produced by The Associates during discovery... providing third-party documents... providing copies of deposition transcripts and access --" and then the affidavit is cut off. At least as provided to ICP, all subsequent pages of the affidavit on this now-key question are missing. For what it's worth, this is precisely the information that ICP sought from the FTC under FOIA; the FTC denied access to five full boxes of documents.

"Substantively," as these briefs put it, that Citigroup's post-Associates voluntary announcements have not resolved the issues is proved most simply by a review, for example, of the Federal Reserve Board's record on Citigroup's May through October 2002 Golden State Bancorp application. Questions arose, even in the FRB staff's minds, which were not addressed by the so-called "best practices." ICP continues to receive internal CitiFinancial documents, including in 2003 (see below), showing continuing predatory lending and insurance practices at CitiFinancial. The statements made in the above-quoted brief make this an even more shameful settlement...

Update of February 17, 2003: It's time to write-up some of the complaints against CitiFinancial which ICP has obtained. We'll start with Missouri:

"Consumer says that after six years of payments, she owes more money than the original purchase price and that she has no equity in the home. Company [CitiFinancial] has threatened foreclosure."

"Consumer purchased a TV from Tex and financed through Company [CitiFinancial]. Total bill came to $1252.00 and she stated that she made six or seven payments and she should only ow $700, Company is stating that she owes $1,000."

"Company [CitiFinancial] has reported consumer late even though consumer has provided copies of cancelled checks as proof of payment."

"Company [CitiFinancial] is calling the consumer and harassing them about their account, sometimes five times a month. Checks enclosed show that consumer has paid on time."

"Consumer has two loans totaling $54,000 on a home she says is worth $40,500. Consumer wants to make sure this doesn’t happen to others."

And that's just a sampling...

Update of February 10, 2003: The Citigroup Watch Report this week focuses on a timely objection ICP has submitted to Citigroup's proposed settlement-on-the-cheap with the FTC and certain private class action lawyers of predatory lending and insurance charges. The deadline was Feb. 7, and ICP met it, thus:

On behalf of the non-profit consumers' organization Inner City Press / Community on the Move and its members and affiliates (collectively, "ICP"), this timely submission contends that Citigroup's proposed settlement is neither fair, nor reasonable, nor adequate... As pertains to this proposed settlement, ICP has been contacted by staff attorneys of the Federal Trade Commission, for information regarding the practices of CitiFinancial and The Associates. After this proposed settlement was announced, ICP sought information from the FTC, including under the Freedom of Information Act. As reflected by the first exhibit hereto, the FTC has denied access to five boxes of information that is relevant to any appropriate assessment of this proposed settlement, including inter alia communications regarding attorneys fees and the scope of the release between the FTC and the plaintiffs' counsel herein. We urge Your Honor to request, obtain and review these five boxes of information in the possession of the FTC.

While there are a number of grounds on which the proposed settlement is not fair, reasonable or adequate, we think it imperative to first consider the context of this Stipulation of Settlement. [Citations omitted.] This proposed settlement of "flipping" claims is inter-linked with the FTC's pending settlement of credit insurance claims with Citigroup. The proposed restitution in this proposed flipping settlement is only $25 million, while the attorneys fees herein are proposed to be $20-25 million. It is our understanding that Citigroup was only willing to settle with the FTC if it could obtain a broad waiver of claims, such as is proposed here.

Question: how is it in a defrauded, flipped and insurance-packed consumer's interest to waive defenses against foreclosure, and in some states a right to rescission, in exchange for $192? Our answer: it is not. [FN: ICP certainly believes that Citigroup should pay restitution, and urges this Court to ensure that restitution is paid, while conducting the inquiry suggested below, closely scrutinizing (and narrowing) the proposed release, urging the parties to resubmit with appropriate and needed injucntive relief, etc.]. You might then question why more objections to this proposed settlement have not been received. ICP has been contacted by a number of other advocates, including attorneys litigating on behalf of Associates and CitiFinancial customers... One tells ICP that he could not formally object to this proposed settlement because it is in his clients' interest to opt out, and he is concerned that objecting on their behalf might be construed as missing the deadline to opt out, or as being inconsistent with opting out. We urge the Court to obtain from the FTC the above-referenced five boxes of documents and to take other appropriate actions, some of which are suggested below.

Another context for the relative dearth of objections to date is the lack of clarity of the Notice of Proposed Class Action Settlement that was mailed out. The Notice does not appear to address, for example, how the proposed settlement would affect borrowers who are in Chapter 7 bankruptcy; it does not fully disclose either how much a class member might receive, nor the import of the claims that would be released...

Neither this proposed flipping settlement, nor the related FTC credit insurance settlement, contains any injunctive relief to attempt to ensure that these same practice do not simply continue, under the CitiFinancial brand name. The Stipulation of Settlement herein recites -- inaccurately, as set forth below -- that Citigroup "has adopted a series of consumer-oriented initiatives that address concerns raised by...consumer groups...". Citigroup's reforms to date have not resolved the issues raised by consumer groups including ICP, including but not limited to systemic misrepresentations made in connection with consumer loans, the continued sale of single premium credit insurance on personal loans, the fraudulent collection of property lists as purported collateral for personal loans and the sale of property insurance on such items as fishing rods, ice chests and lawn mowers (see infra - ICP provided documentation to this effect to the FTC, inter alia in May and June 2002).

In announcing these proposed settlements on September 19, 2002, FTC Chairman Muris declined to answer follow-up questions on why the settlements contain no injunctive relief, and are limited to Associates (and not CitiFinancial, see below). Subsequently, the FTC has not explained why it has chosen to tie its proposed settlement to this Morales case, which was filed only relative shortly before the FTC's settlement, and has chosen to allow plaintiffs' counsel herein to collect fees amounting to 80% or 100% of the restitution to consumers in this case, contrary, e.g., to the Washington Post of September 30, 2002, quoting FTC Chairman Muris opposing attorneys fees such as this, in other cases.

During the FTC's investigation -- which we were told was of CitiFinancial as well as of The Associates, I was telephoned by FTC staffers.... Both requested documents from ICP; on inter alia May 21 and June 5, 2002, ICP faxed CitiFinancial-related documents to the FTC. The attached FTC FOIA denial neither releases or addresses these documents, which were otherwise publicly available since ICP submitted them to the Federal Reserve Board ("FRB") in opposition to Citigroup's then-pending applications to acquire Golden State Bancorp. Even these documents were withheld pursuant to the FTC's attached FOIA Denial, ICP surmises that additional non-exempt documents have been withheld. This Court should obtain the five boxes referenced in the FTC's FOIA denial, and perhaps also the FRB's record in the recent Citigroup - Golden State Bancorp / Cal Fed Bank proceeding, much of which relates to CitiFinancial's ongoing practices, and, in ways, to the loans at issue here...

It is significant that Citigroup has, in more adversarial proceedings than the status herein, vehemently contested the certification of even statewide classes on these issues... While hearsay, ICP wishes to inform the Court that it has been told that Citigroup's in-house counsel actively solicited plaintiffs' attorneys to "convert" their cases into class actions, solely for purpose of settlement with the type of expansive, anti-consumer waiver that is now proposed in this case. With all due respect, and in light of the attached FTC FOIA denial, ICP contends that a detailed inquiry is needed in this case.

The Notice is framed so as to leave an either / or: opt-out OR object. ICP as a consumers' organization has chosen to submit its objections in this form, including citations to publicly-available articles, comparisons to other recent predatory lending (including flipping and insurance packing) settlements that the Court should consider, and instructions and even directions as to where the Court can and should obtain information, withheld from the public, which is relevant to any appropriate assessment of the fairness of this proposed settlement. We contend that, upon a review of these documents (including the "five boxes" at the FTC) and of these comparisons, this proposed settlement, despite concerns for judicial economy, cannot and should not be accepted as fair, reasonable or adequate.

Finally, ICP asks that arrangements be made for the Fairness Hearing on this proposed settlement of this purported nationwide predatory lending class action to be accessible telephonically, and, relatedly but separately, that more than one Fairness Hearing be held, in light of the issues raised above.

So we'll see...One further Citi-squib for this week: after last month hiring Nicholas E. Calio, the chief White House lobbyist, Citi has also now bought Heather Wingate, a "special assistant to the President for legislative affairs."

Update of February 3, 2003: The Federal Trade Commission's partial FOIA response (reported on below) consisted of a slew of complaints against Citigroup subsidiaries. For now, we'll review some of the complaints against Primerica.

A complaint against Primerica and Dan Troutman: "If you are unaware of Primerica's multi-level marketing practices, they charge new recruits $199 for life insurance education (PFSu), which they advertise WILL be reimbursed to you. This is all presented in the open house meeting. They fail to tell you that you must sell their products to get the reimbursement."

Another complaint: "Primerica is a branch of Citigroup. I was approached by someone I work with in my National Guard unit. The offer is to buy in to recruit others and to sell financial services. They do not promise to pay to recruit new people but they do promise that you will receive commissions based on what they well, or what people they recruit sell... They asked for $199 in order to pay for training and licensing fees to become an independent financial analyst... At the present time I have not bought in."

In the third person (complaint received in-person): "Consumer has reason to believe that this company is involved in a pyramid scheme and claims to help people who desire to start their own business. Consumer went to a meeting with this company; the consumer was informed that it was important to bring a couple of guests with the consumer for the consumer to receive a monetary bonus."

Very direct: "Wanted me to give two hundred dollars for the business package, I did not and they wrapped up their session very fast."

Sound like a scam? A semiannual survey by the Edelman public relations firm, released during the WEF meeting in Davos, named Citigroup as among the least trusted companies in the world. Not surprising...

Finally, for this week, we are compelled to update the saga of the most jocular ex-CitiFinancial employee in East Tennessee. Despite the previously quoted "no gossip" (or provision of negative information) policy at CitiFinancial, local CitiFi offices continue to make it near-impossible for customers to pay-off their CitiFinancial loans and accept lower rates, if the ex-employee is thought to be involved. CitiFi branch manager Tim Harrison, on whom we've previously reportedly, has more recently violated CitiFinancial's policy. The new development? District manager Nancy Neel has for the second time tried to use the police and office of the prosecutor to accomplish Citi's goals. There was an allegation of stalking in Denny's (don't ask); and now a more recent allegation. Where will it end? Our bet's on two long words: malicious prosecution...

Update of January 27, 2003: In a Jan. 23 conference call with stock analysts, Citigroup's CEO tried to spin the predatory lending issue. Rambling, he said:

our issues with predatory lending and the case that we settled really related to what Associates, a company that we acquired, did in their offices before we acquired them. And I think that our company was the leader in moving away from doing single premium credit life on loans to people who had real estate. We moved away from a lot of the practices that Associates were doing with real estate brokers that they dealt with. I think that the regulators and a lot of the interest groups would say that our company has done a lot to clean-up what we acquired and has become a leader in lending to people who wouldn't qualify to get loans from banks, or are embarrassed to go into a bank. We have to be very careful that we quantify predatory lending as really something that is predatory lending and don't take the market away from people that really need credit, of which there are tens of millions of those and that deserve it. That are helped, that wouldn't qualify for a loan from a bank, or have had problems with their credit cards and need to work-out of those issues.

Well... no. Through lobbying power alone did Citigroup manage to strong-arm the Federal Trade Commission into limiting the $240 million settlement to Associates. After a 100-day delay, the FTC finally responded to ICP's Freedom of Information Act request for CitiFinancial- and Morales-related documents. The FTC is trying to withhold five boxes of the responsive records; ICP has appealed, as summarized below:

Dear FTC FOIA Appeals Officer:

On behalf of Inner City Press/Community on the Move and its members (including the undersigned) and affiliates, including the Fair Finance Watch (collectively, "ICP"), this is an appeal under the Freedom of Information Act ("FOIA"). On October 10, 2002, ICP submitted a FOIA request to the Federal Trade Commission (the "FTC") for:

(1) all investigative records concerning CitiFinancial Credit Company, headquartered in Baltimore, Maryland, and its affiliate Primerica Financial Services, from January 1, 1998 through the date of your response to this FOIA request (these companies are, inter alia, subprime consumer lenders owned by Citigroup);

(2) all records reflecting [FTC] communications with Citigroup or its representatives AND with plaintiffs' counsel in Morales, et al. v. Associates/Citigroup ("Morales"), a non-certified class action pending in California Superior Court in San Francisco.

As is pertinent to this appeal, I spoke with FTC staffer Alysa M. Stiefel on October 28, October 29, November 18 and December 16, 2002. Since, including in light of the pending fairness hearing in the Morales case, ICP has requested expedited processing, in each conversation I asked for the provision of the responsive records as quickly as possible. Nevertheless, responsive records -- as explained below, far too few of them -- were mailed to ICP on Dec. 30, 2002, more than 100 days after ICP's request.

Ms. Fina's determination letter, dated Dec. 27, 2002 (the "Denial"), states that the FTC identified "five boxes and 565 pages of documents that response to your request, of which appropriately five boxes and 500 pages" are withheld. While ICP is given no way to know how many pages these "boxes" contain, assuming 5000 pages per box, it appears that the FTC has withheld in full 99.74% of the records responsive to ICP's request.

First, we note that the FOIA requires the FTC to provide all reasonably segregable portions of documents. This is was clearly not done in this case, despite the wait of over 100 days.

Second, as I explained in the above-referenced telephone conversations with Ms. Stiefel, ICP was and is particularly interested in records reflecting the FTC's communications with plaintiffs' counsel in Morales, a case to which the FTC chose to tie its settlement. Strikingly, the FTC has provided ICP with not a single record in this regard. It is in the public interest to release these records. Serious questions exist regarding the scope of the restitution to, and release / waiver being required of, consumers, and regarding the attorneys fees in that case.

Since the FTC chose to tie its settlement to the Morales case, which was filed only relative shortly before the FTC's settlement, and chose to allow plaintiffs' counsel in Morales to collect fees amounting to 80% or 100% of the restitution to consumers in that case, it is imperative that these documents be released: only these document may illuminate the seeming contradiction between the just-recited and, for example, the Washington Post of September 30, 2002, quoting FTC Chairman Muris opposing attorneys fees such as this, in other cases. See also, the American Banker newspaper of December 20, 2002, Friday, at Pg. 6.

We note that, since Dec. 20, 2002, the American Banker has published no letter or other clarification from the FTC (whose staff presumably read and/or monitor this newspaper). Also relevant to this appeal: serious public policy questions that can best be illuminated with the responsive documents exist as to why the FTC did not include any injunctive relief its in its Settlement, and why even the restitution was limited to customers of The Associates and not CitiFinancial. The proposed settlement of the California "class" actions recites (inaccurately) that Citigroup "has adopted a series of consumer-oriented initiatives that address concerns raised by...consumer groups...".Citigroup's reforms to date have not resolved the issues raised by consumer groups including ICP, including but not limited to systemic misrepresentations made in connection with consumer loans, the continued sale of single premium credit insurance on personal loans, the fraudulent collection of property lists as purported collateral for personal loans and the sale of (useless) property insurance on such items as fishing rods, ice chests and lawn mowers (see below - ICP provided documentation to this effect to the FTC, inter alia in May and June 2002).

ICP had questioned, and sought at the FTC's September 19 press conference to ask, whether customers obtaining the FTC-proposed "Redress" would be releasing any or all claims against Citigroup. At the press conference, FTC Chairman Muris pointedly prohibited ICP from asking any follow-up question, despite earlier allowing others as many as three questions. Even on this inexplicable 100-day delay, it is in the public interest to release the responsive records.

Third, while ICP is given no way to assess the applicability of FOIA and its exemption to the "five boxes" (see supra), ICP is aware of non-exempt responsive documents that were not provided. During the FTC's investigation -- which we were told was of CitiFinancial as well as of The Associates, ICP was telephoned by FTC staffers, who requested documents from ICP; on inter alia May 21 and June 5, 2002, ICP faxed CitiFinancial-related documents to the FTC. These documents, as the FTC knew and knows, were otherwise publicly available, since ICP submitted them to the Federal Reserve Board ("FRB") in opposition to Citigroup's then-pending applications to acquire Golden State Bancorp. Even these documents were withheld pursuant to the Denial, ICP surmises that additional non-exempt documents have been withheld.

While, for the reasons set forth, it is nearly impossible for ICP to assess the applicability of the cited FOIA exemptions (3, 4, 5 and 7) to the "five boxes," it appears that the FTC's assertion of FOIA exemption 5 in this case appears contrary to the letter and spirit of FOIA. [Case law omitted.]

In light of the Feb. 7, 2002, opt-out date in Morales, ICP requests expedite processing of this appeal, and that all wrongfully withheld documents be released immediately." We'll see.

Update of January 21, 2003: This week's CitiWatch focuses on documents the Federal Reserve has finally provided to Inner City Press, in response to ICP's Oct. 21, 2002, Freedom of Information Act request for records related to the FRS' recent supervision of CitiFinancial, including depositions taken on October 9, 2002, and for withheld portions of records concerning Fed communications with Citigroup in connection with Citigroup - Golden State.

The Fed's (partial) Denial does not mention ICP's requests for the deposition transcripts. This calls into question the seriousness and accountability of the FRB examination of CitiFinancial on which the FRB's Oct. 28, 2002, approval of Citigroup's applications to acquire Cal Fed Bank were explicitly conditioned. ICP complained of this in various submissions to the Fed, including those regarding "http://www.innercitypress.org/hsbc.html".

As to the documents that the Fed did provide: an e-mail dated 9/19/02, reads "Charlie has kindly shared the portion [REDACTION] that discusses Citigroup's Initiatives [REDACTION]." An attachment is withheld in full. From an e-mail dated 9/23/02, Subject line "Eighteen]th] Comment f[rom] Inner City Press," material is redacted (the same applies to the e-mails headed 19th and 20th "Comment Letter from ICP" -- the latter states that ICP's comment was "received from Skadden Arps").

The Fed's Denial haughtily declines to address the questions ICP has raised about the FRB's rules prohibiting ex parte communications, and compliance therewith. We note that among the documents provided is a summary of the July 8, 2002, Formal Meeting in which the FRB acknowledges that ICP raised issues concerning Citigroup's involvement with not only Dynegy, but also WorldCom and Enron. However, in records previously provided by the FRB to ICP under FOIA, FRB staff claim that ICP never raised Citi-Enron, and that therefore ex parte communications on that issue with Citigroup could continue. ICP has appealed.

Update of January 13, 2003: Citigroup has claimed, to Inner City Press, the Federal Reserve and others, that it and its subprime lender CitiFinancial have policies to protect whistleblower employees. Below in this CitiWatch Report, and in the archive hereto, is information that calls that into question. However, Inner City Press this week obtained a CitiFinancial Memorandum, dated July 2002, addressed to "All employees, supervisors and managers." The Memorandum sets forth a number of "violations" which "will subject the violator to immediate discharge." The Memorandum states that Citigroup

"strictly prohibits its employees, supervisors, managers, or anyone affiliated with the Company from engaging in any of the following with respect to any employee, former employee, present or former customer or any other person:

a. gossip;

b. speculation;

c. spreading of rumors;

d. making untrue statements (whether written or oral); and/or

e. making any negative, false, derogatory or defamatory statements (whether written or oral)."

In the Spring of 2002, CitiFinancial became concerned about information being reported, including in this ICP CitiWatch Report, regarding its lending and insurance practices. Much of the information ICP reported was internal CitiFinancial information. Threats were made; policies were announcement, amended, expanded. And now this: a policy which makes it a basis for "immediate discharge" to provide any negative information -- even if true -- about any other employee or customer, current or former.

Admittedly, it is an absurd policy, inevitably violated every day. In fact, providing information on loan delinquency to the credit bureaus violates this "policy." But it also discourages -- under threat of termination -- the reporting to the government of illegal acts within CitiFinancial. Anyone for whistle-blowing? Developing...

Last week, we named as CitiFinancial Employee of the Month a "Home Office Credit" employee in Baltimore who rejected a CitiFinancial employees request to flip a loan. In this Report. we'll name two Citi-Predators of the Week, and by name. Robert Miller, the manager of CitiFinancial's branch in Cookeville, TN, has for a month refused to provide a customer with their payment history. Going back to July 2002 -- the timeframe of the above-quoted Memorandum -- the manager of CitiFinancial's branch on Kingston Pike in Knoxville, Tom Westbrook, wrote to customer Gary Jones advising him that his loan has been successfully paid-off as of April 10, 2002, and telling the customer to "please notify the credit bureau of this and use this letter as authorization to have your account status modified." Last we heard, it was the creditor's duty to provide updated positive information to the credit bureaus. Tom Westbrook's phone number, on the letter, is (865) 693-0482. For shame...

Update of January 6, 2003: Ah, Citigroup -- the company's loud announcement of its foray into China will be a focus of this ICP/FFW Report in 2003, along with watch-dogging Citigroup's questionable subprime lending through CitiFinancial. On the latter, and in the spirit of beginning the new year with kind words, we offer the following minute-by-minute report, from December 19, 2002:

At 9:16 a.m., from a CitiFinancial branch on Broadway / Adair in Knoxville, Tennessee, loan officer "Rick" asked CitiFinancial's Home Office Credit ("HOCRED") to approve a refinance for which he did not have authority. At 9:21, Rick explained that the branch manager was out, "please approve." Well -- and here's the rare praise -- subsequently a CitiFinancial employee known as "HOCRED #18" said no, "we maxed [it] with a loan just made in October." It's rare, but in this case, loan-flipping (and the addition of more points and fees) was averted. For this reason, Inner City Press names HOCRED #18 the CitiFinancial Employee of the Week. Keep those nominations coming...

Update of December 30, 2002: In this year-of-year report, we'll review Citigroup's "Notice of Proposed Class Action Settlement and Settlement Hearing," in the Morales case. It is eleven page long. It refers not only to loan refinances (that is, the Morales proposed settlement), but also to credit insurance (that is, the FTC proposed settlement). It states that "a significant factor" in the FTC's settlement "is the existence of the National Class Case" -- that is, the Morales case. As to the Morales case, no calculation of how or how much restitution would be paid to each victim. Only by inference does one learn that the FTC's chosen Gilardi & Co., LLC, as "program administrator" -- at a fee of $15 million. The notice states that "if the request for exclusion is not timely submitted" -- within 40 days of the mail -- "you will be included automatically in the Class.. You also will be legally bound by the proposed Settlement, including provisions releasing the Defendants... Any Class Member who does not comply with these requirements shall be deemed to have waived such objection and shall be forever foreclosed from making any objection to the proposed Settlement."

The use of the word "foreclosed" is ironic: unless a ripped-off consumer jumps through hoops, including providing documentation to five separate groups of lawyers, Citigroup will be able to foreclose on their home no matter how fraudulent the underlying loan was and is. On page nine, the proposed attorneys fees are finally discussed -- misleadingly. It is stated that "[t]he fees and expenses will be between $20 and $25 million as determined by JAMS Mediators, the Honorable Eugene F. Lynch (Ret.) and the Honorable Daniel Weinstein (Ret.)... The payment of fees to Plaintiffs' Counsel will in no way reduce the money available to the Class."

This implies that the decision to settle five years of loan-flipping for a mere $25 million was in no way affected by the offer of $20-25 million in attorneys fees. On page ten, finally it is disclosed that not opting-out would mean that "will release and discharge" Citigroup "from all known and unknown claims for damages and other relief in connection with all purchase of credit insurance in connection with a real estate-secured or personal loan... between December 1, 1995 and November 30, 2000." That is to say, the FTC's paltry restitution is conditioned on waiving all claims. Our one-word analysis: sell-out. Advice we increasingly hear: opt-out.

Meanwhile, we are compelled the report the following: on October 10, 2002, Inner City Press submitted a Freedom of Information Act (FOIA) request to the FTC for certain documents related to the proposed settlement. On October 23, the FTC tried to evade the request by sending only copies of the proposed settlement itself. The letter named an FTC staffer to call, and ICP did. ICP spoke with this staffer on October 29, November 18, and December 16, 2002. Each time it was said that the documents were nearly all compiled and would be sent out shortly. Now it is December 30 -- and still no documents. Nor has the American Banker newspaper run any response from the FTC to ICP's letter to the editor, published on December 20, pointing out that the FTC's claim that victims would get $1,000 apiece, on average, is entirely inconsistent with the actual proposed settlement. This speaks for itself.

Finally, for this week, a necessarily cryptic message, to the CitiFinancial employees who wrote to Inner City Press on Dec. 23, by certified mail: we are happy to provide the documents you've requested, to the degree that we can. Just tell us where to fax it. As this Report reflects, you can "http://www.innercitypress.org/contact.html" on an anonymous / not-for-attribution basis. Hope to hear from you... Happy New Year.

Update of December 23, 2002: We are compelled to devote this week's ICP CitiWatch Report to the investment banking settlement announced on December 20. The largest payment is by Citigroup, some $400 million. But since Citi reports earnings of $65 million a day, this represents barely a week's profits. Citigroup's CEO, who has admitted ordered analyst Jack Grubman to reconsider (and upgrade) his rating for AT&T, escaped unscathed, for now. Grubman's agreed to a $15 million fine -- but he got paid over $32 million upon leaving Citigroup. Rest assured that Citi will be seeking a tax deduction, arguing that the money is not a fine. Was the "global settlement" a Christmas gift to Citigroup?

Just prior to the settlement, on Dec. 18, Citigroup announced it's hiring a senior Bush administration staffer, Nicholas Calio, oversee its relations with federal, state, and foreign governments. The revolving door could not be clearer. Meanwhile, here's a update to last week's report on CitiFinancial's arbitrary firing and harassment of its employees. We've covered Citi's "suspension" of Penny Fielder; now, the Tennessee Department of Labor has ruled in Ms. Fielder's favor. Let's quote from the TDL's findings of fact:

Claimant's most recent employment prior to filing this claim was as an assistant manager with CitiFinancial from March 4, 1991, until September 16, 2002. An employee sued the employer. The employer suspected employees in the claimant's office were leaking confidential information... Although the claimant gave the employer a sworn statement that she was not involved, the employer suspended her pending investigation... The suspension was without pay, and the employer froze the claimant's 401K account...

CONCLUSION OF LAW: The evidence establishes that the employer placed the claimant on an indefinite suspension... The suspension was carefully crafted to make one think it was a thirty-day suspension, but in carefully reading the document it is clear that the suspension was indefinite...The employer has offered no proof that the claimant did share confidential information with a third party.

A further update: CitiFinancial-Tennessee's most jocular ex-employee is now working smoothly with a number of his ex-colleagues; numerous loans made at exorbitant rates by CitiFinancial are being refinanced. We conclude with this thought: CitiFinancial's treatment of Penny Fielder, and Kelly Raleigh, and countless others, is an outrage, as is CitiFinancial's intentional and systemic abuse of its customers. We do and will do what we can to help right these wrongs. Happy holidays!

Update of December 16, 2002: Citigroup's half-hearted (not, of course, to refer to another anatomical part) "Referral-Up" program is now promoted by breathless fliers distributed through the CitiFinancial branch system. One flier emphasizes the "referred-up" loans take 14 days to close (versus the much faster closing of high-rate loans at CitiFinancial). Citigroup is sure to tell its regulators that it now pays $200 into branches' "ROCopoly" pools for each referral up. Another flier even praises a branch in Fredonia, New York, for a grand total of two referrals-up. But the reality is that there's still a disincentive to refer-up: since most of Citi's subprime loans are in fact refinances (that is, flipping), when a branch makes a referral up it loses interest income which it then has to try to make back. Which is why even with two referrals-up, a branch is in CitiFinancial's top ten.

Fresh from the Greeneville TN branch we have... "Candy's Corner," a column in CitiFinancial's "FOCUS" newsletter that updates employees "on all the happenings with the 2003 Chairman's Forum to be held at the beautiful Westin Rio Mar Resort on Puerto Rico, March 19-23, 2003... For the first time we have reserved the entire hotel for our Chairman's Forum event... In line with the sun and fun of Puerto Rico, we will be doing a more casual evening (Hint.. Part of your attire for the evening will be in your registration bag. If you have any questions, feel free to contact me at 770-806-0006. - Candy Carter, Director, Meetings & Incentive Trips."

This is fodder for satire by the most jocular of Tennessee CitiFinancial's ex-employees. CitiFinancial has attempted to drive him out of the industry by attempting to break business relations with any other company where he works. This has nothing to do with CitiFinancial's supposed "crackdown" on brokers: it is an attempt to intimidate other CitiFinancial employees from becoming whistleblowers. But it's not working....

Why do we specify Greeneville? Well, because three employees were tossed from the Morristown TN office, all charged with "not securing CitiFinancial documents." But the above-reported has nothing to do with the Morristown three. In fact, rather than being fired (following which they could collect unemployment), two of the Morristown three have been "indefinitely suspended" -- Sherri Lee and Lisa Wilcox. (It is said that Ms. Wilcox has been offered $10,000 not to sue). The third employee, Penny Fielder, reportedly could not afford to forego unemployment and so she "quit," meaning that in Citi's view she's foregone her ability to sue. It is said the Freda Monday has, despite her record, been made a branch manager. And we can report, on the cold documents, that new district manager Carter Payne recently received the following e-mail:

"I'm at Transouth branch 278 in Chattanooga. One of our church members is one of your customers at the Chattanooga branch... He is enrolled at CCCS of Chattanooga and has about $1700 to go on the CitiFinancial account. He states that he has not received an interest reduction or any type of concession on his account. When he enrolled with CCCS the Associates owned [the branch which is now called] CitiFinancial and had a national contract with CCCS to reduce interest as well as payments... His counselor at CCCS states that CitiFinancial will not do anything on this account."

As in a number of other cases, the customer was better off, relatively speaking, as an Associates customer, before Citigroup took Associates over...

The American Banker newspaper of Dec. 13 reported on the Montana class action (see below) and the Morales case. The intrepid reporter Laura Mandaro quoted Montana lawyer Jeremiah Lynch that in the Morales" nationwide class action, "the remedy being proposed is inadequate." Hear, hear. Ms. Mandaro reports, correctly, that "some complain that consumers are getting far less compared to what they are giving up in their future rights to sue Citi," and that "some critics have questioned, for example, the size of the California plaintiffs' attorney fees." She notes that "California co-lead counsel Cotchett, Pitre, Simon & McCarthy LLP in Burlingame, Calif., which is defending Oakland's predatory-lending ordinance, did not return calls for this story." The one error in the story is attributable to the FTC: "The largest part of the settlement will go to two million Associates customers who had bought credit insurance. Each will get about $1,000, more than half of the premiums they paid on that insurance, the FTC's Mr. Winston said." The FTC's statement doesn't add up: if the two million people the FTC is claming to help each got $1000, that would be...a $2 billion settlement, eight times more than what the FTC actually settled for. [ICP's letter to the editor appeared in the American Banker of Dec. 20, 2002.]

Update of December 9, 2002: In predatory lending news, there is much on Household - HSBC, "http://www.innercitypress.org/hsbc.html" on this Web site. In this space, we will pinch closed our nostrils and consider a book issued earlier this year, "King of Capital: Sandy Weill and the Making of Citigroup." It was not worth paying for, so we waited to get it from the public library. Its breathless sycophantic praise of Citigroup's CEO is almost funny, in light of developments since the book's publication. The authors, Business Week's Amey Stone and previous KPMG flack Mike Brewster, will never be mistaken for clairvoyants -- for example, the N.Y. attorney general does not appear even once in the index, or in the book. Citigroup's 2000 acquisition of Associates First Capital Corp., which ended up costs Citigroup at least $240 million in (still-proposed) settlements with the Federal Trade Commission and certain class action lawyers, is addressed only briefly, in two places, in the book: a single sentence on page 13, and three paragraphs on page 267. The "analysis" presented is as follows: Sandy "simply shrugged off the storm of criticism that followed for purchase what many believed was a shady organization... as is often the case, Sandy seems to have been right."

This is the book's cult-like refrain: Sandy was right! In an update that should be required, perhaps these authors would stick to their mantra: "$240 million? So what? A million dollar slush-fund grant to the 92nd Street Y? Who cares? Sandy was right!" This book is even more embarrassing than we imagine a Citigroup-published hagiography would be. For comparison's sake, we are working through the (four volume) "History of the Hongkong & Shanghai Banking Corporation, copyrighted by HSBC in 1987 -- and even it has more credibility than this "non-authorized" book. We like to be nice, in reviews -- but in this case it's impossible.

For those interested, longtime hard-lender Bob Willumstad "will participate in a conference call hosted by Merrill Lynch on Monday, December 9, 2002, at 10:30 a.m.." Citigroup tells you these things because it's required under the SEC's Reg FD (Fair Disclosure). Willumstad is quoted but once in the book. It's regarding his and Sandy's Baltimore days; Willumstad says "There was no social life." Tea leave readers may notice that Chuck Prince is quoted more extensively in the book, including regarding his "discovery" by Sandy. We'll leave this topic for another time. Reuters of Dec. 8 reports that Citigroup will come under review this week by a U.S. Senate subcommittee conducting hearings on financing deals put together by Enron's banks, including Citigroup...

Update of December 2, 2002: How nice the (mainstream) press is to Sandy... Fortune magazine of Nov. 25 ran another suck-up piece, by Carol J. Loomis; she brags of "a series of interviews that FORTUNE had with Citi executives in early November, [in which] questions about any legal matters (including private lawsuits) or potential dollar damages were off-limits. Some ground-rules. Business Week says Sandy won't have to leave. Other financial journalists have heard (and told ICP) otherwise. They also complain that Charles O. Prince III now believes he is not only at the right hand of God, but that he's become God. Prince deigned to speak with both Fortune and BW, but routinely shuts out reporters who want to ask questions. In this way, he's managed to delay the sharper background pieces that have been in the works. Not for too much longer, though.

A Citigroup - Morales (California class action with paltry settlement) update: the fairness hearing is now scheduled for February.

Update of November 25, 2002: The crusty Economist magazine, Nov. 23, asks "Should Sandy Go?" It responds, for the most part, in the affirmative: "Mr. Weill is one of the highest-paid executives in the world, with a complex package worth more than $250 million over the past two years, according to Graef Crystal, a compensation consultant. The strongest argument against Mr. Weill is that he is not worth it: that Citi's business, notwithstanding its huge profits, has begun to suffer from a series of poor decisions on his watch." We'll leave the Jack Grubman nursery school scandal for others. Weill's blithe purchase of Associates First Capital Corp, and refusal to meaningfully reform its and CitiFinancial's business, particularly on high-cost non-real estate loans with packed insurance (including insurance on leaf blowers, ladders and fishing rods), are both immoral and call into question this eleven-figure compensation package. That such a large corporation doesn't even have a successor ready is amazing. As is the fact that HSBC is trying to follow Citi's ill-fated Associates buy, with its Household proposal (click "http://www.innercitypress.org/hsbc.html" for more).

Update of November 18, 2002: Inner City Press has been informed that on November 14, the judge in the Morales, et al. v. Associates, Citigroup, et al. case postponed a hearing on the settlement that was scheduled for that day. The class, by the way, has still not even been certified. The glaring lack of injunctive relief, and low proposed pay-outs and the high proposed attorneys fees, all call that settlement, and the FTC's, into question.

Ol' Sandy Weill on Nov. 13 admitted he told former analyst Jack Grubman to reexamine his rating on AT&T, but denied he requested Grubman to upgrade the stock to win banking business or support from the bank's board of directors. "Weill's disclosure is the first time the powerful executive has publicly admitted to involving himself in the day-to-day business of the company's stock analysts, and deepens questions about Wall Street banking practices." Yep - he asked Grubman to "re-examine," but not to upgrade...

Citi 'round the world: Reuters of Nov. 12 reported that Citi "plans to build up its offer of personal banking services, aiming to attract medium- and high-income clients over three years. 'In difficult times it is personal banking which provides good results...and we will strengthen that business,' Citigroup Espana Chairman Sergio de Horna told reporters. Citibank Espana will also focus on attracting foreigners with a second residence in Spain, and sees potential clients particularly from Britain, Germany and Belgium to whom it will offer tailored services." Meanwhile, the take-subprime-overseas strategy pioneered so predatorily by Citi is now being adopted by "http://www.innercitypress.org/hsbc.html", which last week proposed to acquire "http://www.innercitypress.org/hsbc.html". As in so many things, Citi leads the race to the bottom... Click "http://www.innercitypress.org/hsbc.html" for more; we apologize for this shorter-than-normal weekly Report.

Update of November 11, 2002: ICP has just filed with the Federal Reserve Board a critique of the Fed's October 28 Citi-Golden State approval order, issued despite the acknowledged lack of completion of the Fed's ongoing examination of CitiFinancial -- click "http://www.innercitypress.org/citical.html" to view ICP's filing. Beyond the critique, it raises some more Citi problems from last week: see, e.g., Dow Jones Business News of October 29, 2002, regarding "a report this week in the Chinese-language 21st Century Business Herald that Citibank provides domestic clients with credit cards from its Hong Kong and Singapore branches that enable individuals to transfer funds out of China." ...

And something we'd initially missed, but report now: AFX's call to the Federal Reserve Bank of New York, inquiring into the possible ramifications of the probes into the involvement of Citigroup's Sandy Weill (who's also an FRBNY board member) in brokerage analyst and other misconduct. " The New York Fed spokesman said it would be up to Weill or Citigroup to establish behavior guidelines, and that the New York Fed "has no guidelines or policies concerning whether its officials and directors should recuse themselves from their Fed duties while they are the subject of outside probes." It might be a good time for the Fed to get a policy on this issue, no?

So: Citigroup's domination of its regulators continues, for now.

Update of November 4, 2002: Citigroup purports to have weathered the storm about its subprime lending practices. Last week it gained Federal Reserve approval to acquire Golden State Bancorp, with the Fed deferring resolution of the predatory lending allegations until it completes an examination of CitiFinancial (this exam was announced 15 months ago). And then there's the matter of Citigroup's linked proposed settlements with the Federal Trade Commission and certain attorneys in a case in California, Morales et al. versus Associates and Citigroup ("Morales"). On October 28, the judge in the Morales case, Richard Kramer, requested more legal briefs. In the proposed Morales settlement, Citi would get a broader waiver from consumers (who would not be able to raise the fraudulence of their loans, even as a defense against foreclosure) than Household got from the state attorneys general. It now appears clear the Citigroup would not have agreed to settle with the FTC if it were not getting a waiver, through this California case.

In this Morales case, it is proposed that $25 million to distributed to approximately 130,000 consumers who had their loans flipped: that's less then $200 per consumer. Meanwhile the plaintiffs' lawyers in Morales have requested between $20 million and $25 million in attorneys fees.

As simply one example, there's an already-certified class action in Montana; the lead named plaintiffs are Elizabeth and Jim Wombold. As first reported by the Great Falls Tribune, Citigroup attorneys Ben Klubes and Neil Ugrin opposed a motion that these Montana plaintiffs' cases proceed under Montana law (which includes a state Consumer Protection Act which might require the forgiveness of the loans). Mr. Klubes was part of a team of Citigroup lawyer who in 2001 interviewed and intimidated ex-CitiFinancial employees in South Carolina whose stories ICP had put in front of the Federal Reserve Board. Last month Mr. Klubes was quoted that the $25 million proposed settlement in Morales would be distributed to, and require releases from, 130,000 consumers ($192 per consumer). For shame...

We'll weigh in on Citigroup's purported split of stock analysis and investment banking once it becomes clear what substance, if any, it has. Overseas, even after last week's sale of 28%, Citigroup still holds a 20% stake in Saudi American Bank (SAMBA), Saudi Arabia's largest listed bank. SAMBA shares fell 5.2 percent in the first four days of last week on the Saudi stock exchange on rumors that Citibank had sold its entire 22.8 percent stake, but then recovered some losses after a Saudi newspaper reported that the U.S. bank only sold 2.8 percent of SAMBA. The Riyadh-based bank became one of the largest banks in the Middle East after it merged with United Saudi Bank in July 1999. The remaining SAMBA shareholders are mainly Saudi government institutions...

Update of October 29, 2002: after six p.m. on October 28, the Federal Reserve announced its approval of Citigroup's application to acquire Golden State Bancorp. The Fed's approval "http://www.federalreserve.gov/boarddocs/press/orders/2002/20021028/", sixty pages in length, evades the most troubling of the issues raised, about predatory practices at CitiFinancial, and the scandals surrounding Citi's investment bank. ICP from its first comment, on June 3, inquired into the status of the examination of CitiFinancial on which the Fed had conditioned its approval of Citigroup - EAB in mid-2001. Now, fifteen months later, the Fed states that "[t]he Board is in the midst of conducting its examination of CitiFinancial and CitiFinancial Mortgage." Order, page 39. This fifteen month delay reflects either the Fed's lack of commitment to rooting out predatory practices at the largest company it regulates or, less plausible, the Fed's lack of resources.

Throughout the summer, ICP provided the Fed with documents from inside CitiFinancial, including sales training scripts that instructed employees to ask an applicant how much they could pay per month then offer a package with insurance included, and documentation of scam "mystery" shopping (employees were told the dates and topics of the "tests") and that employees' bonus are determined by how much insurance they sell. On October 9, the Fed sent three lawyers to Tennessee to depose several of ICP's sources. Now the Fed approves Citigroup's application, stating that "some of the comments require additional investigation" (id. at 44), and noting that it has expanded its examination to include CitiFinancial's insurance sales practices and "compensation systems."

Certainly, these matters deserve investigation. But in mid-2001, the Fed conditioned its approval of Citigroup-EAB on just this examination, and stated that it would "consider the information gathered in its examination... in reviewing future proposals by Citigroup." That the exam is still not completed, fifteen months later, means that Citigroup has had a "bye," or "get out of jail free" card, for more than a year now.

In order to give Citigroup what it wants, the Fed has created a precedent that bodes badly for CRA and communities. In mid-2001, the Fed saw fit to condition its approval of "http://www.innercitypress.org/citieab.html" on an examination of Citigroup's subprime lending business. But now in 2002, the Fed tries to entire disconnect predatory lending and merger approvals. It states, for example, that "[s]ome commenters have taken the opportunity provided by this notice to give the Board information and comments about the subprime lending and insurance sales activities of Citigroup's subprime lending affiliates." Order at 39, emphasis added. That has never before been the Federal Reserve's position -- and for a reason: the Fed is required by law to consider applicants' effects on low- and moderate-income communities, and their managerial resources, risk-management and compliance safeguards. The Fed dodged the first bullet in 2001 by approving Citi-EAB but conditioning its approval on an examination. But 15 months later, the exam is not done. It turns out it is in an applicant's interest to be undergoing an examination: it's a free ride as long as the examination continues. And how long will that be? The Fed states that "the scheduling, conduct and completion of an examination is determined by the availability of resources of the banking agencies and is not related to the timing of acquisition proposals." Order at 45. The Fed is implying that it does not have the resources to conduct an examination of CitiFinancial in less than 15 (or more) months. Given the Fed's budget, which is hardly overseen by Congress, the Fed's defense cannot be taken at face value. The Fed states that it is conducting its exam in "close cooperation" with the New York State Banking Department. Id. at 39. Perhaps the Fed is blaming its Citigroup-friendly delay on the NYSBD. The NYSBD has been delaying in responding to ICP's Freedom of Information Law request regarding its supervision of Citigroup; the Fed denied ICP access to "eight linear feet" of documents about this exam.

The "bones" the Fed throws in the approval order are limited to expanding the never-ending examination of CitiFinancial to including insurance sales practices and compensation systems, and requiring Citigroup to file reports on its subprime lending -- well, they're most limited to its real estate lending -- for the next two years. As regards Primerica, the Fed passes the buck to the OTS. The Fed states, in footnote 67, that "commenters also expressed concerns about the sale by a Citigroup affiliate, Primerica Financial Services (and its agents), of loan products of Citicorp Trust (previously called Travelers Bank & Trust, FSB) and insurance products of other affiliates. The Board has consulted with the OTS, the appropriate federal supervisor of Citicorp Trust, and relevant state regulatory agencies and forwarded the comments to those agencies." Since none of the reforms Citigroup has announced applies to Primerica, it will be interesting to see how (sadly, if) the OTS deals with the Primerica issues. To Citigroup it doesn't matter much: they needed the Federal Reserve approval in order to buy Golden State Bancorp. And Citigroup will claim that this approval vindicates them. Even the reforms that the Fed calls "the Enhancements" won't all go into effect until "the end of 2003," according to the Order. It's a racket: perhaps the Fed exam can be kept going for another fifteen months, and then some other miniscule "reforms" announced. That's all the Fed seems to require: ground-cover for approvals.

The Fed notes that ICP (and others) have "alleged that Citigroup underreports delinquencies in its subprime loans portfolio." [Note: ICP, with CitiFinancial's own documents, has shown this: employees distort delinquency by flipping loans or advancing the due dates by making small payments, because that's the only way they can get their ROCopoly bonuses]. But the Fed says that it "will continue to review such data in connection with its supervisory examinations." By the logic of this Fed order, everything can be secret, and approvals (at least for Citigroup) are automatic -- in part because the examinations are never completed, even after 15 months.

The Fed recites that "a commenter" -- that'd be ICP -- "asserted that, in light of allegations about the subprime lending activities, securities-related activities, and other banking services, the Board should find that Citigroup is not in compliance with the BHC Act's requirements for financial holding companies." Then the Board baldly states that "the requirements... are met in this case." PNC was threatened with losing financial holding company status; the range of scandals in which Citigroup is involved is much broader. But we forgot-- the Fed has given Citigroup an ongoing "get out of jail free" card.

Regarding comments that the Citigroup's proposed settlement with the FTC and a "related" class action are insufficient, the Fed states that it "has forwarded these comments to the FTC." That's where we'll be going next. Citigroup's dominance of its putative regulators continues -- as will this campaign. ICP has documented CitiFinancial's even more predatory practices in "http://www.innercitypress.org/citimex.html", India and elsewhere. The Fed states ICP's contentions about Citigroup's "projects worldwide that might damage the environment or cause other social harm... contain no allegation of illegality or actions that would affect the safety and soundness of the institutions involved in the proposal." Footnote 83; in footnote 39 the Fed blows off allegations about Mexico. Not only will this campaign continue: it will expand. As they say, watch this space.

Further 10/29/02 update: on October 29, the Office of Thrift Supervision issued an eight-page approval letter. The OTS states that "a federal [thrift] charter may be granted only to persons of 'good' character and responsibility... The FRB, in its approval of the related application... did rely on commitments and undertakings by Citigroup, designed in part to address issues raised in various comments... OTS has concluded that is appropriate to condition approval of the federal charter application on Citigroup complying with the commitments made to and conditions imposed by the FRB." But the Fed's approval noted that Citigroup's unreformed Primerica, which sells high-cost products of Citicorp Trust FSB, is regulated by the OTS; the Fed simply forwarded comments about this to the OTS. Now the OTS defers to and relies on the Federal Reserve, without even mentioning much less addressing this issue. Note that CitiFinancial still imposes single premium credit insurance on non-real estate loans and sells bogus "property insurance" on supposed collateral like fishing rods and ladders, and that "bonuses for CitiFinancial sales people are tied to how much credit insurance they sell in conjunction with new loans." Fed Expands Citigroup Probe To Insurance-Sale Practices: In Approval of Golden State Purchase, Subprime-Lending Issues Are Detailed, by Rob Wells, Dow Jones / Wall Street Journal, October 29-30, 2002. We'll say it again (and again): for shame...

Update of October 28, 2002: as the Federal Reserve prepares to vote on Citi - Golden State on October 28, let's consider last week's spin-war. On October 23, the Wall Street Journal's Charles Gasparino reported that "[t]he New York attorney general's office, stepping up pressure on Citigroup Inc., will question Chairman and Chief Executive Sanford I. Weill after gathering new evidence in its broad investigation into research activities at the financial-services giant, people familiar with the matter say. Attorney General Eliot Spitzer has informed Citigroup lawyers that the interests of the firm and Mr. Weill may have diverged in the investigation."

Sandy Weill put a memo on Citi's web site, stating in part that "[m]y conduct has been entirely appropriate and proper." Marty Lipton, a partner at Wachtell, Lipton, Rosen & Katz and a lawyer for Citigroup, not surprisingly defended Weill's actions. "The notion that there could be any charge against Sandy Weill is inconceivable," said Lipton, who Weill described as a "longtime friend and adviser."

Quickly, a spokeswoman for Spitzer's office, Juanita Scarlett, told reporters that "Sandy Weill has offered to meet with our office and we've accepted his offer of cooperation Scarlett said Weill isn't a target of the investigation "at this time." She confirmed that Weill has been informed that his own legal interests may be diverging from Citigroup's but added that the warning was a "formality" and that the discussion with Weill would be an "interview" and not a deposition. Meanwhile a Wall Street Journal spokeswoman said the paper stood behind its story. "We are confident it is both fair and accurate," she said. Probably too fair...

In the following days, the Daily Telegraph of London quoted from a Merrill Lynch research note that "the Sandy Weill premium is long gone from C[itigroup]'s stock price". MarketWatch of October 23 mused that Robert Rubin is too old and politically tainted by the Enron scandal to succeed Weill, and that "even a guy as intent as Spitzer is not going to kill the golden goose." Which is another way of saying, "Too big to fail." Click "http://www.innercitypress.org/citical.html" to view ICP's October 27 comment to the Federal Reserve and other regulators.

Update of October 21, 2002: Well, following the Federal Reserve staffers' deposition-taking in Tennessee (see below), at least three CitiFinancial staffers have been fired. These include the branch manager of the Morristown, TN branch -- not for lending and insurance irregularities, but rather for the alleged part they played in CitiFinancial information, including the insurance sales training scripts ICP submitted to the Fed, becoming publicly available. That's "Citi-Reform" for you...

From a tech company's press release last week: "Primerica will launch their new business in the United Kingdom and Spain." Watch out. The release's paragraph about Primerica states that it " provides some 6 million clients with quality financial products and services, principally term life insurance, investments and debt consolidation loans." But note that none of the (insufficient) reforms that CitiFinancial has announced would apply to Primerica, which impacts at least six million households in the United States...

Update of October 14, 2002: As the Solomon Smith Barney scandals draw ever-closer to Citigroup's CEO, we focus this week on comparing the scam CitiFinancial settlement announced on September 19 to the October 11 settlement between Household and various state regulators. The Household / state regulators' settlement, unlike the FTC's and class action lawyers' proposed settlement with Citigroup, contains injunctive relief and required reforms. Also, while Citigroup would be obtaining a near-total release of claims for its victims (estimated by the FTC at two million people), the Household settlement and release explicitly allow those who accept payments to be able to raise their claims as defenses to judicial or non-judicial foreclosure actions.

Three quick comparisons: the Citigroup settlement that the FTC and California-based class action lawyers announced on September 19 would spread $240 million among two million victims: an average of $120 apiece. The Household settlement splits $484 million among an estimated 310,000 victims: over $1,500 apiece. Citigroup's victims would be require to release all of their claims; Household's victims could retain their claims as defenses to foreclosure. And, most significant to ICP (and presumably to the agencies), whereas reforms were required from Household, no such reforms were required from Citigroup, despite CitiFinancial's continued imposition of single premium credit insurance on non-real estate consumer loans, solicitation of lists of household goods like fishing rods and ice chests in order to sell insurance on them, etc.. See last Friday's "breaking news" update about the Federal Reserve's inquiry in Tennessee, on which we will be running updates. Until then, for or with more information, "http://www.innercitypress.org/contact.html".

Update of October 11, 2002: on October 9, three attorneys from the Federal Reserve Bank of New York were in Tennessee deposing ex-CitiFinancial employees. The Fed representatives' questions focused on how CitiFinancial employees are trained and how disclosures are made to CitiFinancial customers. While those deposed, and Inner City Press in advance of the depositions, urged the Fed to go into CitiFinancial branches and obtain certain documents before they can be moved or destroyed, this was not done. However, the Fed now has in its possession documents and sworn deposition testimony that evidence current predatory practices at CitiFinancial. This must have ramifications on Citigroup's "http://www.innercitypress.org/citical.html", and otherwise.

In a September 23 "http://www.innercitypress.org/citical.html" to the Federal Reserve (summarized below on this page), Inner City Press recounted the tale of Kelly Raleigh, a CitiFinancial employee who had just be fired based on Citi's (erroneous) suspicion that she was the source of documents ICP had previously obtained, submitted and reported on. On September 30, ICP chided the Fed for failing to have contacted Ms. Raleigh. The following week, Ms. Raleigh was contacted by Ms. Shari Leventhal, an Assistant Vice President at the New York Fed, and an appointment for deposition was made.

Ms. Raleigh made the Fed aware, among other things, of documentation of particular fraudulent loans, and that CitiFinancial employees including district manager Nancy Neel had recently been observed removing and shredding documents. For that reason, ICP did not report the New York Fed's visit to Tennessee before it took place (that is, to make further shredding less likely). Now that the three Fed representatives have come and gone (without seeking to obtain the documents Ms. Raleigh told them about) -- now, it can be told.

Accompanying Ms. Leventhal were Ms. Yoon Hi Greene, Counsel, and Ms. Gretchen Downing, Bank Examiner, both of the New York Fed. On the morning of October 9, ex-CitiFinancial employee Roy Cook was deposed for more than two hours in a conference room at the Holiday Inn Express in downtown Knoxville. The Fed lawyers' questions included: How were you trained to sell insurance? How were you trained to disclose APR and rate? How were you trained to encourage joint applications (that is, co-signers), and to sell joint insurance? And who trained you to do these things?

Among the trainers listed were Mr. Ed Starkey, now a higher-up within CitiFinancial. Supervising CitiFinancial during this time frame were Chuck Prince, Bob Willumstad, Marge Magner and others. The Fed also asked about so-called "defensive loans," in which CitiFinancial seeks to convert unsecured debt into a lien against the customer's home or auto. The Fed examiners were provided with a number of documents, including sample print-outs from CitiFinancial's Maestro computer system, sample ROCopoly bonus reports (showing the pressure on employees to sell insurance), and sample sales training scripts. They asked: why do these documents have exhibit numbers on them? Answer: Because Inner City Press has already submitted them to the Fed, opposing Citi-Golden State.

That the New York Fed attorneys claimed to be unaware of CitiFinancial documents that ICP submitted in timely "http://www.innercitypress.org/citical.html" to Citi's Golden State application, from June 3 onwards, was surprising. It reflects either that the Fed staffers only superficially prepared for their journey to Tennessee or that the Federal Reserve Board wants to confine the ongoing problems at CitiFinancial to some confidential slow-boat outside of the merger application process. Neither explanation reflects well on the Fed.

Already, the Fed has withheld "eight linear feet" of documents concerning its review of CitiFinancial, in response to a FOIA request from ICP. Throughout September, the Fed allowed Citigroup lawyers to privately brief them, with no notice (and only cursory summaries) to commenters against the Citi-Golden State deal. These briefing included Citigroup's spin on its proposed settlement of predatory lending claims with the FTC and certain California-based class action attorneys (the problems with this settlement are analyzed below on this page). We report these facts now, to do what we can to make clear what the Fed knew, and when they knew it. As to Citigroup's knowledge, we note that we've been reporting on these predatory lending issues, specifically in Tennessee, since February 2002. Inner City Press raised the issues, in person, to the new Solomon CEO, at that time, and to Citigroup's overall CEO at the company's annual meeting in April 2002. Ignore and/or try to cover-up a (predatory lending) problem long enough, and it just might just get malignant... This will be updated.

Update of October 7, 2002: Citigroup's "global settlement" of predatory lending claims on September 19 was so convenient to Citi, while not requiring reforms to its current practices, that Inner City Press has continued to inquire into the settlement. The FTC's refusal to answer questions on September 19 had been noted; this week we focus on the California cases settlement of which would result in up to two million customers waiving (that is, losing) their claims. Importantly, the release that customers would sign in those cases would mean that defenses of fraud and flipping could not be used even to oppose subsequent foreclosure cases brought by CitiFinancial. So the settlement would be not only convenient, but lucrative, to Citi.

It is important to note that the California cases that Citi and the FTC selected have not yet been certified as class actions. In fact, the class action lawyers in these cases have repeated failed to get earlier cases certified as class actions. Inner City Press has spoken with a number of plaintiffs' attorneys in other states, with cases against CitiFinancial, who were explicitly solicited by Citigroup's in-house lawyers, including Martin Wong, as to whether they might wish to turn their cases into class actions and settle them. While this seems counter-intuitive, the explanation is that Citigroup was looking for a national class action to settle on the cheap (here, $25 million), while extinguishing the rights of millions of consumers.

As we've reported, the California cases would be settled for $25 million; the attorneys fees would be $20 to $25 million. The lawyers in the California case are arguing that they would not be taking an amount equal to the settlement -- they want to compare their fee to the $215 million FTC proposed settlement. But how can private attorneys be taking credit for a government settlement, for the purpose of attorneys fees?

In fact, the Washington Post of September 30, 2002, quoted FTC Chairman Muris that "[o]ur job is to get more money to consumers, and by giving attorneys less, we're giving consumers more." The Post reports that "[s]o far this year, the FTC has challenged attorney fees in three proposed class action settlements, winning in two cases. It also has urged the Judicial Conference, which oversees the federal court system, to amend its class action rules in a way that could limit attorney fees, particularly in cases that rely on information already uncovered by government agencies." The Post did not comment on (or perhaps notice) this irony: that the FTC is collaborating, in the Citigroup settlement, with lawyer who are either getting 50% of the settlement, or are claiming credit (and attorneys' fees) for a case brought and settled by the FTC.

We'd like to ask FTC Commissioner Muris about the inconsistency -- but we forgot, Mr. Muris doesn't take questions, or takes them only selectively. So, these and other points may be raised to the judge overseeing the California cases, Richard Kramer. Observers have noted the shrewdness of including Cotchett, Pitre and its founding partner, Joseph Cotchet, as co-lead counsel in the California cases that Citigroup wants to settle. Mr. Cotchett is a long-time plaintiffs' lawyer, who is active with Trail Lawyers for Public Justice. Some believe that Mr. Cotchett is not aware of the context of this proposed Citigroup settlement. Time will tell. The points above have been raised to the Federal Reserve and OTS in further opposition to Citigroup's pending "http://www.innercitypress.org/citical.html".

On a lighter note, click "http://www.wallstreetpoet.com/New%20Pages/pages/pg2z4.html" to view ICP's editor's Oct. 3 "http://www.wallstreetpoet.com/New%20Pages/pages/pg2z4.html" (doggerel) on Citigroup, ""http://www.wallstreetpoet.com/New%20Pages/pages/pg2z4.html"," on the "http://www.wallstreetpoet.com/New%20Pages/pages/pg2z4.html" site...

Update of October 1-2, 2002: Citigroup's stealth sleaze belatedly disclosed -- on October 1, Inner City Press received by mail a slew of correspondence between Citigroup and the Federal Reserve Board, reaching as far back as September 5, 2002. These material should have been sent to Inner City Press and others at the time, but weren't. Let's review:

According to an FRB memo dated September 23, on September 5 four Citigroup attorneys met with Fed staff "to discuss the status" of the FTC's predatory lending case against Citigroup. "The discussion lasted approximately 40 minutes," according to the Fed memo. None of the timely commenters opposing Citi-Golden State were informed of this meeting, much less allowed to participate. In fact, the Fed delayed 18 days before memorializing the meeting in a memo, and a further three days before sending this memo out.

At the September 5 meeting, Citigroup "outlined the terms of the proposed settlement reached between Citigroup and FTC staff." The terms "were substantially identical to the terms Citigroup had presented to Board staff at a meeting on July 11, 2002." Citigroup "stressed that, although the FTC settlement would contain no injunctive relief, Citigroup and CitiFinancial would voluntarily implement additional polices and procedures (the 'Enhancements') to CitiFinancial's insurance sales practices to safeguard against abusive practices in CitiFinancial's subprime lending operations."

Note: it will be important to remember this last phrase, because Citigroup has since stated that these "Enhancements" to not even purport to apply to PFS, Citigroup's Primerica Financial Services, which is also (at least partially) a Citigroup "subprime lending operation."

The Fed's September 23 memorialization of the September 5 meeting has numerous redactions, including of whole paragraphs. ICP will be pursuing this improperly withheld information under the Freedom of Information Act.

The next contact which the Fed has now belated disclosed took place on September 13, 2002. This meeting lasted two hours and fifteen minutes, and involved Citigroup's Charles Prince, Todd Thomson, Joan Guggenheimer, Stephanie Mudnick and Michael Zuckert. The Fed memo states:

"Mr. Prince provided an overview of Citigroup's analysis of the various securities-related issues and how Citigroup was addressing those issues... He also responded to System staff's inquiries about the additional responsibilities of Citigroup's senior management in light of the recently announced managerial changes.... As an update, Ms. Mudnick advised that the FTC was expected to publicly announce the settlement on Thursday, September 19... She added that, on September 12, CitiFinancial has sent a memo to all of its branches concerning these changes... Mr. Thomson discussed the impact of all these matters on evaluations of Citigroup by the rating agencies and Citigroup's finances. He also discussed certain other matters related to Citigroup's financial strength."

Interestingly, this cursory Fed memo does not have any explicit redactions on it. The reason? The memo is so general as to be meaningless. This was an ex-parte contact of which no notice was provided, and of which only the most vague notes have now been provided.

Next, on September 16, FRB staff spoke with Citigroup's Carl Howard for ninety minutes "to clarify certain additional policies and procedures regarding CitiFinancial's insurance sales practices. This six-page Fed memo, dated September 24, is substantially redacted. It refers to a letter sent to the FRB on September 11 by Citigroup's outside counsel, Stacey McGinn at Skadden Arps.

This September 11 letter, which was supposed to be sent to ICP at that time, was only provided by Citigroup on October 1, along with another week-old document, Citigroup's September 23 letter to the FRB. This letter includes Citigroup's responses to "Questions from the Federal Reserve dated September 17" -- questions that the FRB should have, but didn't (and still hasn't) sent to ICP. Among Citigroup's undated answers is this Q & A:

"Do the new best practices apply to PFS?"

"No. The best practices were designed expressly to address the concerns raised regarding insurance sales within the CitiFinancial branch-based business."

This is significant, given predatory lending issues that have been raised about the sales practices of PFS / Primerica. The Q&A also re-confirms that CitiFinancial continues to sell single premium credit insurance on non-real estate loans (which is more than half of its business).

What's the upshot, for purposes of this mid-week Report? Well, the FRB and Citigroup have both improperly withheld notice of and information about their discussions throughout the month of September 2002, in flagrant disregard for the FRB's own prohibition on ex parte communications. As it turns out, on July 11 Citigroup presented to the Fed a proposed FTC settlement that was "substantially identical" to what the FTC announced on September 19. On September 13, Citigroup already knew that the FTC would hold its press conference on September 19. Mr. Chuck Prince III et al. were allowed to bloviate to the FRB for over two hours on September 13, with no notice to timely commenters opposing the Citigroup - Golden State application pending before the Fed. Citigroup's "reforms" do not address PFS / Primerica at all, and hardly address CitiFinancial's non-real estate lending, which continues to including single premium credit insurance and insurance on such items as fishing rods, ice chests and leaf blowers. Citigroup remains a predatory lender -- but they sure have extensive and stealth access to the Federal Reserve Board, at the highest levels.

Various observers now speculate that Citigroup would try to consummate its Golden State proposal as soon as it received FRB approval. FRBNY staff have told investors (read, arbitrageurs) that there will be no 15-day waiting period attached to the FRB's approval. This would eviscerate any opportunity for meaningful judicial review of the FRB's decision-making, and deeply flawed process in this case.

In further Citi-spin news, late on October 1 it was announced that Citi board member Michael Masin will leave Verizon and join Citigroup: this is supposed to provide assurances that Citigroup is addressing its problems. Mr. Masin was a partner at the law firm of O'Melveny & Myers who worked on a GTE deal in 1990; he joined GTE in 1993. He faced controversy in connection with GTE's purchase of the privatized telephone company in Puerto Rico in 1998 and 1999. Now he's supposed to help "save" Citigroup. This has been and will be raised, in detail, to the Federal Reserve and OTS in further opposition to Citigroup's pending "http://www.innercitypress.org/citical.html".

Update of September 30, 2002: Now that the proposed settlement orders in the FTC's and California class action lawyers' cases against Citigroup are public, questions have arisen not only about the FTC's failure to obtain reforms of CitiFinancial, but also about the adequacy of the $25 million settlement for Associates flipping victims on a purportedly nationwide basis. Interestingly, the California class actions to which the FTC chose to tie its proposed settlement were only filed in February 2002. The cases have not yet been certified as a class even as to California customers, much less nationwide. Nevertheless the proposed California settlement provides for attorneys fees of between $20 and $25 million dollars: as much as the "flipping" redress that Citigroup is offering.

For those interested, the process in California will be as follows: sixty days written notice must be provided to the members of the proposed nationwide class. Then there will be a "Fairness Hearing," before or which objections can be made. (Notices of appearance and summaries of objections are due 20 days before the Fairness Hearing). Any California settlement could be appealed, although the FTC's proposed settlement filed at the Federal court in Atlanta states that appeals would not stop the FTC process. The FTC's settlement is not effective unless and until the California settlement is accept by the California court, after the Fairness Hearing. If this does not take place within ten months, the FTC is free to withdraw the proposed settlement and continue its litigation.

Inner City Press had wondered, at sought at the FTC's September 19 press conference to ask, whether customers obtaining this proposed "Redress" (said to average $1,000) would be releasing any or all claims against Citigroup. FTC Chairman Muris pointedly prohibited Inner City Press' reporter from asking any follow-up question, despite earlier allowing as many as three questions per reporter. Now from the documents we see: customers would be releasing all claims, explicitly including claims that are not presently aware of (even if this were through Citigroup's own withholding of information).

The proposed settlement of the California "class" actions recites (inaccurately) that Citigroup "has adopted a series of consumer-oriented initiatives that address concerns raised by...consumer groups...". Citigroup's reforms to date have not resolved the issues raised by consumer groups including ICP, including but not limited to systemic misrepresentations made in connection with consumer loans, the continued sale of single premium credit insurance on personal loans, the fraudulent collection of property lists as purported collateral for personal loans and the sale of (useless) property insurance on such items as fishing rods, ice chests and lawn mowers.

It is illuminative to compare the settlement that FTC requested and obtained from First Alliance earlier this year with its September 19 proposed settlement with Citigroup. In the First Alliance case, the FTC requested and obtained a list of prohibited business practices, including no misleading representations (including regarding the purported benefits of bill consolidation), and no future Truth in Lending Act violations. The FTC's First Alliance settlement explicitly states that the FTC can obtain discovery, and can use mystery shoppers at First Alliance or its successors. Questions have arisen, and will be more formally raised, regarding why the FTC did not obtain any of these things from Citigroup? The FTC's proposed settlement states (and this is to be evaluated and confirmed or denied by the court) that it is "in the public interest." We think not... This has been raised, in detail, to the Federal Reserve and OTS in further opposition to Citigroup's pending "http://www.innercitypress.org/citical.html". And -- this will be updated. Until then, for or with more information, "http://www.innercitypress.org/contact.html".

Update of September 23, 2002: Having critiqued the Federal Trade Commission's deceptive settlement with Citigroup the day it was announced (September 19, see below), we're devoting this week's CitiWatch Report to an insider's view of CitiFinancial.

Inner City Press last week interviewed a long-time CitiFinancial employee who was recently fired for whistle-blowing: that is, for reporting widespread consumer protection violations in the CitiFinancial region where she worked. Her name is Kelly Raleigh. She began working at what was then the Sandy Weill-run Commercial Credit in 1990. After the merger with Citicorp it was renamed CitiFinancial. As recounted below, she was brow-beaten from April through July 2002, was suspended in July, and "terminated" in August. This is her story.

Kelly Raleigh never aspired to be a predatory lender. She went to work for Commercial Credit in 1990. Through her twelve year career, she would work at and, later, manage, a half-dozen different offices of Commercial Credit then the renamed CitiFinancial. As she was promoted from loan officer to branch manager, she began to see more and more irregularities. She was trained to close loans while covering the actual loan documents with her forearm, so the customer couldn't read them. She declined to do this, choosing instead to describe to the customer the terms of the loan.

Even when the company was named Commercial Credit, it required "property lists" of household items to purportedly secure consumer loans averaging $5,000 to $7,000. Employees were directed to sell insurance on these household items. Inner City Press has previously reported on CitiFinancial insurance sold on ice chests and fishing rods; Ms. Raleigh describes a loan to an elderly woman that was "secured" by a ladder, on which insurance was sold. Routinely, personal property insurance was sold to customers who already had comprehensive (and expensive) homeowner's insurance: a process known as "double-dipping" in which the second insurance policy has no benefit to the customer. Ms. Raleigh states that CitiFinancial employees routinely doctored insurance applications for customers to make them eligible for insurance (selling unemployment insurance to housewives / home-makers, and changing the ages and medical history of customers). The reason? To get bonuses, employees had to hit ever-rising insurance sales "penetration levels."

Ms. Raleigh's real troubles, however, began when she became aware that CitiFinancial was illegally collecting on a loan, and had been for a number of years. The loan was a second mortgage made by the Morristown, Tennessee office. When the borrower died, CitiFinancial did not go to court and obtain a judgment: rather it began collecting from the deceased borrower's son. They pressured the son to put up his car as collateral. When Ms. Raleigh became aware of the illegal collection practices, she raised the issue up through the chain of command: to her district manager Jim Chakales, to her regional manager David Baer, and, as recounted further below, even higher. But nothing was ever done: the Morristown branch manager Lisa Wilcox wrote a memo claiming that the borrower was still alive. Ms. Raleigh was instructed to "quit being a cry-baby and just do it" -- that is, collect on it. By then the loan had been transferred from the Morristown office to the Jefferson City office, where Ms. Raleigh was branch manager and therefore in charge of continuing to collect on the loan. She refused to keep collecting, and advised the original (and deceased) borrower's son to seek a refund. She told her supervisors she had given this advise -- "since I have to live with myself," she told them.

There were other CitiFinancial practices Ms. Raleigh began to complain about. When she started working at Commercial Credit, the "qualifying level" of insurance sales required to get a bonus was set to 81. Later, under CitiFinancial, this minimum was raised to 100: that is, insurance sales on an ever-larger percentage of loans. Also, while CitiFinancial's Maestro computer system who show the loan officer CitiFinancial's "best prices," employees were directed to request higher interest rates from borrowers. The Maestro computer system might show that 10% interest could be offered: but employees were supposed to offer a 14% interest rate. "We're already screwing these customers," Ms. Raleigh says. "But why do we have to do that far?"

When in February 2002 Inner City Press began to report on systemic predatory lending by CitiFinancial, including documentation from branches in Tennessee, Ms. Raleigh and others were summoned to a meeting in the CitiFinancial office in Kingston Pike, Tennessee. The date was April 4, 2002: Ms. Raleigh was told to go to Kingston Pike and to not tell anyone she was going there. Inside, a CitiFinancial auditor from Baltimore named Keith Black was waiting, along with a CitiFinancial outside counsel named Clarence Rison and his associate Ginger Browning. Ms. Raleigh was told that this was a deposition; she was questioned about any knowledge she had of documents being "leaked" from CitiFinancial offices. Ms. Raleigh said she had no knowledge. The following day, they visited her at the Jefferson City office, asking pointedly if she had anything else to say. She didn't.

Inner City Press continued reporting, and submitting on June 3, 2002, to the Federal Reserve and, at the FTC's request, to the FTC, documentation of, for example, CitiFinancial insurance sold on fishing rods and ice chests, and various internal CitiFinancial memoranda and sales training scripts. On June 25, 2002, Ms. Raleigh was summoned to the CitiFinancial's Broadway office, where she met with Mr. Rison and another CitiFinancial official: James E. Cappola, the Director of Investigations of Corporate Security for CitiFinancial. At these meeting, Ms. Raleigh described at length the consumer protection compliance violations she had witnessed, including illegal collections from a dead man's son, forgery by employees on insurance documents, and systemic distortion of delinquency. To obtain bonuses, reported delinquencies can only be so high. But the numbers can be distorted by, for example, canceling insurance policies so that insurance premium can be reallocated to loan payments. Ms. Raleigh also corroborated the earlier account of Roy Cook (see below) of distortion of delinquency by district manager Chakales: the invocation of "blizzard deferments" on loans when no snow had, in fact, fallen.

Mr. Rison expressed doubts about all of this. "Are you really saying that Mr. Chakales did that?" he asked.

"Yes," said Ms. Raleigh.

I think you're mis-remembering things, Mr. Rison insisted, again and again.

"So I guess you're going to fire me," Ms. Raleigh finally said.

"No," said CitiFinancial's Mr. Cappola. "You cannot be fired for saying this. We're here to get the facts and get this thing fixed."

But it soon became clear that the "thing" that CitiFinancial wanted to "get fixed" was the leaking of documents reflecting CitiFinancial's practices, and not the practices themselves. On June 26, the day after the meeting at the Broadway office, Ms. Raleigh was confronted in the Jefferson City office and asked again: who is leaking? Who is keeping diaries of our practices? By now Ms. Raleigh had contacted an attorney, and she told Mr. Rison and his colleagues that she was represented by counsel, and not to talk with her anymore.

But on July 3, regional manager David Baer and district manager Jim Chakales came to the Jefferson City office and told her she was suspended. When she asked why, she was not given a reason. Rather, Mr. Chakales said that he'd happily take a lay off to fix this, to stop this leaking. As Ms. Raleigh collected her personal possession, Mr. Baer said that he'd have to search her purse. In anger Ms. Raleigh offered him various "feminine protection" products, and asked to look in his wallet. Meanwhile Mr. Chakales had gone out to tell employees that Ms. Raleigh was being replaced (that is, not simply suspended).

As previously reported -- but now understood -- immediately following CitiFinancial's July 3 suspension of Ms. Raleigh, CitiFinancial changed the locks on her office in Jefferson City, and, strangely, at the Morristown office as well. Morristown employees were interviewed over two days, and district manager Nancy Neel was observed removing documents from the Morristown to Jefferson City office, where she shredded the documents. Only then was an audit of the Morristown office performed: an audit that the Morristown office not surprisingly passed. What might the shredded documents reflect? It has been suggested to Inner City Press that they consisted of the paper trail of various fraudulent loans: transactions in which, to sell insurance, customers' ages were changed (so that the age on the ID documents and the applications forms were different); documents concerning loans that CitiFinancial had been illegally collecting on, etc..

Over the next week, Ms. Raleigh went to spend time with her family. Mr. Chakales was leaving her daily messages on her cell phone: "We need to speak to you." On July 15, Ms. Raleigh went to a Ruby Tuesday's restaurant to meet with Mr. Baer. When she got there, Mr. Baer announced that he was waiting for one more person. When this person arrived, it was a female attorney. "But I'm represented by a lawyer," Ms. Raleigh said. "You can't have a lawyer question me without my own lawyer here." But the questioning proceeded: Ms. Raleigh was asked to provide the names of the people leaking information or she would be prosecuted.

"For what?" she demanded. When the question wasn't answered, she called her lawyer on her cell phone, who told her to leave Ruby Tuesday's immediately. She did.

It must be noted -- and regular readers of "http://www.innercitypress.org/index.html" will already have seen -- that Ms. Raleigh's account substantially corroborates the earlier reports by ex-CitiFinancial employee Roy Cook. Just as Ms. Raleigh was threatened with prosecution, in her meeting with David Baer and a lawyer at Ruby Tuesday's, CitiFinancial district manager Nancy Neel has actually lodged a criminal complaint against Mr. Cook. CitiFinancial has sought to "black-ball" Mr. Cook, telling other prospective employers that they will not do business with them if they hire Mr. Cook. As to Mr. Cook, Citigroup's public relations staff dug up a decade-old conviction from the time Mr. Cook was in college. That's dirty pool, as Inner City Press expressed at the time. But what could Citigroup "dig up" on Kelly Raleigh? How is her suspension and termination consistent with Citigroup's claims, to the Federal Reserve, to ICP and to the public, that they protect and do not retaliate against whistle-blowers -- much less that they want to "do the right thing, every time"?

On August 13, 2002, Kelly Raleigh received a letter of termination, dated August 7 and labeled "Overnight Delivery." The letter tersely stated that the cause was her refusal to cooperate with Company management regarding a violation of company policy. The "Company Policy" referred to must be a policy against whistle-blowing: because Ms. Raleigh repeatedly sought to report and cooperate regarding exposing and changing violations of consumer protection policies and laws.

At week's end, Inner City Press learned of breaking news: manager Lisa Wilcox and two other employees of the Morristown office have been suspended for 30 days each; district manager Jim Chakales has reportedly been suspended "indefinitely, pending investigation." Ms. Raleigh predicts that, if Mr. Chakales does not return to CitiFinancial, it will be described as a retirement. But are even these actions, quietly taken months after the facts began to be reported and documented by Inner City Press, sufficient? "They used me for twelve years," Ms. Raleigh says. Upon termination, she lost all her stock options. Her 401(k) plan, once worth $4,700 dollars, declined in value to $2,000. Another CitiFinancial employee saw her 401(k) decrease from $180,000 to only $60,000.

On September 16, 2002, CitiFinancial CEO Mike Knapp issued a memo purporting to announce additional "reforms" in CitiFinancial's insurance sales practices. On September 19, after Citigroup settled the FTC's predatory lending case (with both Citigroup and the FTC claiming that the problems were limited to Associates First Capital -- which had and has nothing to do with the above-recounted), Bob Willumstad claimed that CitiFinancial is a leader in the consumer finance industry. Reflecting on her employment since the days of Commercial Credit, which was successively run by Sandy Weill, Bob Willumstad, Marge Magner and others, Ms. Raleigh characterizes these executives as criminals. The more specific chain of command up which Ms. Raleigh's and others' complaints rose, but were ignored, went as follows: district managers Jim Chakales and Nancy Neel; regional manager David Baer; then Don Laney, then K.C. Meade, then Mike Knapp, the current CEO of CitiFinancial. "Do the right thing every time," indeed. This has been raised, in detail, to the Federal Reserve and OTS in further opposition to Citigroup's pending "http://www.innercitypress.org/citical.html". And -- this will be updated. Until then, for or with more information, "http://www.innercitypress.org/contact.html".

Update of September 19, 2002: The Federal Trade Commission announced a $215 million proposed settlement with Citigroup at a press conference today. Having closely observed this process, Inner City Press concludes that the proposed settlement ill-serves consumers. It does not reform in any way CitiFinancial's current practices, practices about which even the FTC has expressed concern, for example by obtaining and filing in the case an affidavit from a long-time CitiFinancial (and not Associates) employee, Gail Kubiniec. In both 2001 and 2002, FTC staff attorneys telephoned ICP and requested copies of evidence ICP has obtained regarding CitiFinancial. ICP provided the FTC with proof that CitiFinancial continues hard-selling single premium credit insurance on consumer loans, and sells insurance on the household goods it takes as collateral for consumer loans, including items such as fishing rods, ice chests and random video tapes: items on which CitiFinancial does not foreclose (rendering the insurance of little to no value to consumers). None of this is reformed by the FTC's proposed settlement.

An Inner City Press reporter called in to the FTC press conference. FTC Chairman Muris' was brief -- from 11:08 to 11:15 a.m. -- followed by a question and answer session. After a representative of Inside Mortgage Finance asked three questions, Inner City Press' reporter asked:

"In light of the affidavit the FTC obtained from long-time CitiFinancial employee Gail Kubiniec, and evidence the FTC requested and obtained from community groups, why has the FTC taken no action on CitiFinancial's current and continued sale of single premium credit insurance on non-real estate consumer loans, nor on the sale of insurance on household items such as fishing rods and ice chests, on which CitiFinancial does not foreclosure?"

The response: if we had chosen to litigate the case, it would have taken years before consumers saw this money. $215 million is our largest settlement to date.

ICP's reporter than said, "I have a follow-up question."

FTC: "Next question." No follow-up was allowed, despite the fact that the reporter just prior to Inner City Press' was allowed three questions, including two follow-ups.

Thereafter the Wall Street Journal's Paul Beckett asked, in essence, how many other private lawsuits remain against CitiFinancial. The FTC emphasized a single California class action which is being settled in conjunction with the FTC case.

A Los Angeles Times reporter asked about the mechanics of the payment of redress to consumers. Although the FTC did not say it, we will: it is not at all clear what percentage of this $215 million will be paid out. Consumers will receive a mailing. Given the low response rate to CitiFinancial's previous mail-outs offering the opportunity to apply for a lower interest rate, it would appear that less under 60%, and probably less than half, of those receiving the mailing will respond. Why? In part because just mailings are perceived as junk mail. [Side joke: FTC chairman Muris plays Ed McMahon]. The FTC states that the average amount paid to eligible consumers would be $1,000. That's not much. And despite the FTC's attempt to focus the press on the $215 million figure as "unprecedented," $215 million to the $1 trillion-in-assets Citigroup means far less than $60 million did to First Alliance. In fact, this settlement / redress money may well have been provided for in Citigroup's agreement to acquire Associates First Capital Corp. in the Fall of 2000.

To editorialize (more): the FTC today announced a fraudulent and deceptive settlement, not too different from late night weight-loss commercials. It may be a "win-win" for Citigroup (which is mis-perceived to have now resolved these problems) and for President Bush's FTC (which cites an "unprecedented" $215 million figure than may, in fact, be far less) -- but it is hardly a win for consumers, either past consumers, or those in the present and future. This will be raised, in detail, to the Federal Reserve and OTS in further opposition to Citigroup's pending "http://www.innercitypress.org/citical.html"; it will be raised and documented in other forums. And -- this will be updated. Until then, for or with more information, "http://www.innercitypress.org/contact.html".

Update of September 18, 2002: Sources tell Inner City Press that the Federal Trade Commission plans to hold a press conference on Thursday, September 19, in order to announce its settlement with Citigroup of predatory lending charges. As reported below, this settlement does far less than it should. Left untouched, for example, are CitiFinancial's abusive insurance sales practices, particularly in connection with non-real estate consumer loans. CitiFinancial's Mike Knapp's September 16 memo, characterized by Citigroup and in the press as a "series of reforms," in substance changes very little. On insurance, the memo trumpets CitiFinancial's current practice, then says that a new "consumer-friendly brochure will be added," for example. The N.Y. Times of September 16, after adopting CitiFinancial's definition of credit insurance as " credit insurance, an optional product meant to cover monthly payments if the borrower is seriously injured or dies," quotes Bob Willumstud that "We continue to look at ways to improve the sales process... The complexity of the sales process means there is big potential for misunderstandings."

But it's no misunderstanding: CitiFinancial's compensation scheme, called ROCopoly, requires employees to hit particular levels of insurance sales in order to get their bonuses. This is why insurance is hard-sold at CitiFinancial, and it will continue. Also apparently slated to continue is CitiFinancial's practice of obtaining "property lists" as supposed collateral for personal loans -- including such items as fishing rods, ice chests and self-recorded video tapes on the lists, then selling insurance on them. This insurance is fraudulent per se, in that CitiFinancial admits it does not foreclose on or repossess such "household items." There's no misunderstanding here: CitiFinancial is a predatory lender. The FTC's too-limited settlement does not change that, nor does Citigroup's laughable "reform" memo of September 16.

The FTC's failure to act on these problems at CitiFinancial -- after collecting affidavits about them, and asking ICP and other groups for documentation -- is akin to a police officer asking a neighborhood resident to help in an investigation, and then refusing to act on the information provided. In advance of the FTC's September 19 press conference (and the Federal Reserve ruling on Citi-Golden State which will apparently follow thereafter), we say: for shame. That the Fed is preparing to "http://www.innercitypress.org/citical.html" is foreshadowed by a front-page article in the September 18 American Banker, noting that Citi buttressed its consumer finance sales practices last year during the approval process for EAB. It promised to stop selling single-premium credit insurance and to improve its record of lending in minority communities. The Fed gave its approval for the EAB transaction one week later." The article reports: Steve Silverman, a spokesman for Citi, said: "We continue to work with regulators" on the Golden State deal, "which we believe is on track to close shortly." Hey, Citigroup's September 16 was even less meaningful than what Citi announced during the "http://www.innercitypress.org/citieab.html". How low can you go? Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of September 16, 2002: While the FTC tries to placate Citigroup by ignoring evidence against CitiFinancial that the FTC has requested and obtained, and on the eve of another half-way reform announcement by CitiFinancial (see below), ICP submitted a comment on these matters to the Federal Reserve, OTS and FDIC. It is summarized "http://www.innercitypress.org/citical.html". The American Banker of September 16 reports that "Citigroup Inc.'s consumer finance chief today will outline more changes to sales practices... Starting next month the unit would reduce the maximum points it charges on mortgages to 3% from 5%... Loan officers will give quotes on loan payments excluding credit insurance and will provide more information about the insurance. Before a loan is closed, CitiFinancial will confirm in writing whether the borrower wants to purchase the insurance, and it will require borrowers to read and sign a summary of their loan conditions."

Since Monday's American Banker newspaper is finalized the previous Friday, it appears clear that Citigroup leaked the announcement. The memo is not yet available, yet Citigroup would like it to serve as ground-cover for the Federal Reserve to approve Citi's pending application to acquire Golden State Bancorp. ICP has asked the Fed for the memo, and for an extension of the comment period to review and analyze it. As the exhibits ICP has submitted to the Fed (described "http://www.innercitypress.org/citical.html") make clear, any "reform" that does not meaningfully address CitiFinancial's personal consumer lending and insurance practices, including the sale of useless insurance on such items as fishing rods, ice chests and video tapes, would be insufficient. Furthermore, in light of Citigroup's recent statements to the Fed attempting to justify CitiFinancial employees signing documents for customers -- in ICP's experience, often without the customers' knowledge or consent -- the alluded-to "reforms" should be fully inquired into, with a skeptical eye. Developing...

Now, a follow-up on the scam settlement reportedly brewing between Citigroup and the Federal Trade Commission. The Dallas Morning News of September 13 quotes the FTC's Joel Winston back-peddling wildly, downplaying the significance of an affidavit the agency filed earlier in the litigation by a longtime employee of CitiFinancial. "That affidavit 'was not introduced as a legal charge against Citigroup,' said Joel Winston, associate director for financial practices at FTC. He added that it was one of the factors that the court looked into to see if there were any similarities in operations between the Associates and Citigroup. The affidavit was 'only one factor and one piece of evidence,'" Winston said.

Let's forget for a moment that the FTC requested and obtained evidence of predatory lending at CitiFinancial that goes well beyond real estate loans, and predated and continues past Citi's acquisition of Associates. Mr. Winston's new spin is in consistent with his own prior statements. The Buffalo News of November 8, 2001 reported that the "affidavit suggests lending practices alleged to have occurred at Associates First Capital may also happen at CitiFinancial offices, according to Joel Winston, the FTC's acting associate director for financial practices."

So -- as of November 2001 even Mr. Winston at the FTC admitted that, irrespective of Citi's acquisition of Associates, there "may also" be predatory practices at "CitiFinancial offices." Since November 2001, FTC staff attorneys have requested and obtained from ICP detailed evidence of predatory practices at longtime CitiFinancial offices, both in real estate lending and in consumer loans, on which single premium credit insurance and useless property insurance is still sold. Since Mr. Winston's November 2001 quote, CitiFinancial has not announced a single new reform. So what has happened? Citigroup, which has lost one-third of its market capitalization, feels a need to announce the resolution of one of its many troubles. The FTC is apparently willing, in exchange for being able to announce the "unprecedented" settlement amount of $200 million. But while $60 million might be a substantial sub for First Alliance, $200 million isn't much for Citigroup, which has $1 trillion in assets. In fact, Citigroup revised its merger agreement with Associates to apparently set aside reserves. The FTC began the case in March 2001 by saying it would ask for, at minimum, $500 million. Now it appears ready to settle for less than half of that. It's not a fine: the money would go to purportedly make ex-Associates' real estate borrowers whole. Questions have arisen regarding whether those paid would have to sign waivers, agreeing not to sue Citigroup.

More generally, the making-whole of past victims is something that can be, and is being, addressed by private civil litigation. The FTC's role, under the FTC Act, is to ensure that harm to consumers is enjoined and stopped. The FTC has made just that argument in the case. But now it appears content to limit itself to past behavior by a company Citigroup bought, and to allow the predatory practices at CitiFinancial of which it is aware to continue. For shame.... Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of September 9, 2002: At an investors' conference on September 6, Citigroup's CEO said that Citi is "close" to settling predatory lending charges with the Federal Trade Commission. That day's Wall Street Journal had reported the settlement talks, using a figure of $200 million as the expected penalty. Citigroup's CEO said that the issues to be settled all relate to practices of Associates First Capital before Citigroup bought it. If so, the FTC consent decree, whatever the dollar value, will be incomplete. Throughout 2002, evidence has come to light of predatory practices at CitiFinancial itself, particularly in CitiFinancial's "non-real estate" consumer lending. CitiFinancial still hard-sells single premium credit insurance on personal loans (on items such as fishing rods and leaf blowers, ice chests and random video tapes); CitiFinancial still directs its employees to include insurance in loans without customers' consent.

In fact, as ICP has obtained and submitted to the Federal Reserve evidence of these CitiFinancial practices, staff attorneys at the FTC have telephoned ICP and requested copies of the documents. ICP provided them, and in each communication urged the FTC not to limit its case to real estate loans, nor to what Citigroup's CEO characterizes as "Associates' old practices." The WSJ quoted Citigroup's outside counsel that "[t]he FTC and Citigroup are in advanced settlement discussions regarding the preacquisition lending practices of Associates." The FTC is aware of wider predatory practices at CitiFinancial. So why would it now be considering such a limited settlement with Citigroup?

The American Banker of September 9 argues that the rumored settlement reflects Citigroup's loss of power in Washington. We question that analysis: if Citigroup is able to limit the FTC settlement to only a part of CitiFinancial's business, despite the evidence that the FTC has, Citigroup's domination of regulators and enforcement agencies continues. On September 6, the Federal Reserve spokesperson told the Washington Post that the Fed's five rounds of questions of Citigroup about CitiFinancial, in connection with Citi's Golden State application, has been "routine." Practitioners know that it is not routine -- but why would the Fed be downplaying its own belated inquiry into CitiFinancial? The Banker quotes ex-Fed lawyer Oliver Ireland that "'if some regulator goes after them and they settle,' banking regulators could be 'required to consider things related to the management of that function' when assessing a merger application." It's been reported that the Citi-FTC settlement will probably be announced in "two to six weeks." One would expect, by ex-Fed Ireland's argument, the Fed to not rule on Citi - Golden State until after the settlement's announced, and questions asked and answered about it. We'll see...

Reuters of September 6 quoted Citigroup's CEO that "I think we've made the right moves in how we've reorganized that business so we can make the settlement with the FTC and the lawyers and all the 50 states." The number of class actions against CitiFinancial has been rising; ICP's heard tell of one in the Deep South in which, in a recent deposition, a loan officer admitted imposing credit insurance despite customers' explicit requests not to have it. Over the weekend, we received the following e-mail:

I am an ex- employee of CitiFinancial.... I would like to comment on the insurance sales ethics that CitiFinancial practiced. I guarantee that if a poll was done on the last 100 customers who took out a loan with CitiFinancial, that at least 60 of them had no idea how much it cost, or what their payment would have been without it, or no idea that it was even on the note. Every quarter in the year, The employees are paid high dollars based on their insurance premiums sold. It is no wonder why employees are
pressured to violate their own company policy, not to mention the government's...

And so the beat goes on... The mono-syllable, from Bloomberg News of September 6: "The following are comments about regulatory investigations and banking mergers in Germany and Europe by Sir Win Bischoff, chairman of Citigroup Europe, the European division of Citigroup Inc. Question: There has been a lot of news about investigations of Citigroup and its various activities in the United States by a number of regulators. Do you foresee any similar investigations in Europe or are you aware of any taking place now? [Answer:] 'No.'" We'll see about that....

Enviro-connection: on the board of director of Conoco ConocoPhillips: Citigroup "senior vice chairman" William Rhodes... In other Citigroup community reinvestment news, we've heard that previous Citibank CRA officer Elizabeth Hall Ortiz has quickly and quietly left the company. Vaya con Dios. Click "http://www.innercitypress.org/citical.html" for a summary of ICP's most recent comments.

Update of September 3, 2002: the Federal Reserve has asked Citigroup 20 more questions, mostly about CitiFinancial. Click "http://www.innercitypress.org/crreport.html" for a review of the questions; click "http://www.innercitypress.org/citical.html" for ICP's September 3 comment, including a review of the scandals now swirling around Citigroup. Business Week (9/9, Biaco, Timmons) opines that it is "far too early to write off Weill, but his personal vulnerability to the reform movement now rolling over Corporate America was underscored recently when Spitzer broadened his investigation of SSB to include the Citi CEO." The "wild card in Citi's managerial deck is Robert E. Rubin, who joined the company at Weill's behest in 1999 after stepping down as Treasury Secretary and serves as a kind of roving corporate ambassador. Like Prince Alwaleed," the Saudi who is Citi's largest shareholder, "Rubin says that he still stands with Weill." Rubin said, "Obviously this is a difficult period ... but he's dealing with this in exactly the way that he should." Business Week adds Rubin, 64, "has said that he is not interested in running Citi. But if Weill were to leave in a hurry, it is likely that Citi's board would draft Rubin, at least on an interim basis."
ICP view: well, no. Rubin is hardly distanced from the scandal: it was he who called the Treasury Department seeking help in pressuring the rating agencies to do a favor for Enron. Nor has he solved (or even got his $45 million a year hands dirty with) Citigroup's ongoing predatory lending. So, no. And see Fox News of August 29, 2002:

"HUME: Fox News has learned that Securities and Exchange Commission Chairman Harvey Pitt has added former Clinton Treasury Secretary Robert Rubin to the agency's ongoing inquiry into the Enron bankruptcy. Fox News first reported a congressional request for an SEC investigation into Rubin's actions as one of the heads of Citigroup in the days leading up to ImClone's stock implosion and subsequent bankruptcy. As a director of Citigroup, Rubin oversaw millions in loans to Enron but has denied any wrongdoing."

AFX of August 29 notes that " Citigroup's Weill has sat on the AT&T board since 1998 and also holds a directorship with United Technologies Corp. Weill's involvement with AT&T has come under heightened scrutiny in the last week following a subpoena of AT&T initial public offering documents by New York attorney general Elliot Spitzer who is investigating potential conflicts of interest in Citigroup's research department. Spitzer is reported to now be looking at how Citigroup's Salomon Smith Barney unit won a lucrative IPO offering from AT&T and at whether Weill attempted to boost Salomon's research ratings on the telecommunications group. AT&T chairman Michael Armstrong also sits on Citigroup's board." ICP note: this conflict was raised, but entirely dismissed, at Citigroup's last shareholders' meeting in April 2002 -- as was the issue of CitiFinancial hard-selling useless insurance on such items as ice chests and fishing rods....

On the environmental front, from the August 30 AFX: "Petroleo Brasileiro SA has received the first installment of a $180 million loan granted by Citibank Japan, Petrobras financial director Joao Nogueira Batista said. The installment amounts to $50 million. The rest of the funds will be disbursed next month, he said." At the Earth Summit in Johannesburg, Citigroup has been identified as among the most environmentally destructive banks. It's no surprise, given its lack of standards throughout its lines of business...

And in further access-buying news, Citi's Banamex announced on August 30 that its CAO Alberto Navarro is retiring and that "he will be replaced by Javier Arrigunaga, who worked as representative to Mexico of the Paris-based Organization for Economic Cooperation and Development (OECD) and was at Mexico's central bank for 16 years." From Citi's Robert Rubin / Stanley Fischer school of hiring practices...

Update of August 26, 2002: On August 23, ICP submitted a supplement comment to the Federal Reserve, OTS and FDIC opposing Citigroup's Cal Fed applications. Click "http://www.innercitypress.org/citical.html" for a summary. Bigger picture, Citi's strategy: Citibank for "high-income individuals," CitiFinancial's abusive loans for lower-income people. On August 22, Citi in Japan announced it's selling most of its outstanding housing loans and loans backed by real estate to UFJ Bank. But it "said it would still keep a hand in the Japanese housing loan market through its business with high-income individuals. 'The decision is based on our strategy to always focus on areas where our strength is demonstrated at the fullest,' a Citigroup spokeswoman said." Reuters, 8/22. This is Citi's global strategy: note that CitiFinancial is going in Japan, with super-high cost loans.

Meanwhile, Citi's Robert Willumstad last week warned that German banks are in danger of being taken over by rivals because of their low profitability levels. Many European banks are not willing to make employees redundant or to close offices, Willumstad said. "Those who do not grapple with their costs will be bought sooner or later because they are not competitive," he added...

And in Brazil, Citi on August 19 opened a "corporate university" at Aracaiguama, in the interior of Sao Paulo state. "We want to be one of those players, and we need a single philosophy of abilities and competences, because changing jobs in these megabanks will be difficult," said Citibank director for human resources Delsio Klein. "There was a high cost, to the extent that the dollar lost its buying power." Until 1998 or 1999, when the dollar was quoted at R$1.20, recalled Klein, taking someone for training in Florida, in the United States, where Citigroup maintains a training center, it cost $300 per person per day. "With the university, we plan to have training for $50 to $100 per student per day," he said.

And in China, Shanghai Pudong Development Bank Co. is reportedly ready to sell a minority stake to Citigroup: at least 8% of Shanghai Pudong could be sold to Citibank. Price estimates are up to $200 million. The Chinese bank recently confirmed that it planned to bring in a foreign strategic partner...

Update of August 19, 2002: The big-picture Citigroup story of last week was not limited to SSB telecom "analyst" Jack Grubman, his resignation and outrageous $32 million hush-money payment. Rather, it was an unsourced speculation piece in the Financial Times of August 12, "Citigroup Focus Could Bring Banking Spin-Off." The idea being floated was the break-up of Citigroup, at minimum into retail (banking and subprime consumer finance) and wholesale (investment banking) units, along the lines of Citigroup's spin-off of Travelers. That investors might call for this (the old saw about "unlocking the value") is one thing. But there are significant public policy reasons to encourage or require such a break-up.

Too big to fail: as Citigroup become more enmeshed in daily scandals, the potential liabilities of taxpayers á la S&L bail-out comes to the fore. While certain pure-play investment banks are also referred to as "too big to fail," Citibank is directly insured by the FDIC. That an insured bank's affiliates were doing offshore structured finance deals with Enron -- and that its is bank-affiliates Citi and Morgan Chase that are most in the hot seat for this -- leads one to wonder why the purer-play investment banks Goldman Sachs, Lehman Brothers et al. are not similar embroiled in this controversy. Perhaps it is easier to supervise a purer-play investment bank than a grotesque conglomerate of structured finance and predatory lending.

Add this to the relatively small size of Citigroup's de facto management team, the lack of any clear successor to the current major domo, the quasi-governmental functions Citigroup has taken on, including distribution of public assistance and other benefits, and the reasons for breaking up Citigroup only mount... Some say this type of break up could only happen once the emperor steps down. But can the interest of one individual hold so much sway?

Update of August 12, 2002: On August 12, ICP submitted a supplemental comment and additional exhibits to the Fed; click "http://www.innercitypress.org/citical.html" for a summary. Along with Citigroup's mounting retaliation against whistleblowers at CitiFinancial, the issues formally put into the record before the Fed include, e.g., AFX European Focus of August 9, 2002 [snip - edited to make this Report shorter]

Update of August 5, 2002: Questions have mounted: how could the Federal Reserve (and OTS and FDIC) consider approving Citigroup's application to buy Cal Fed Bank given the growing scandal around Citigroup's dealings with Enron, to say nothing of the detailed evidence of predatory lending at CitiFinancial? On August 5, ICP submitted a supplemental comment and additional exhibits to the Fed; click "http://www.innercitypress.org/citical.html" for a summary. Among the issues formally put into the record before the Fed are Citigroup's CEO's three-paragraph response to the Senate's Permanent Subcommittee on Investigations' nine questions of July 25. Weill claimed that since "Citigroup has over 270,000 employees and engages in millions of transactions every year... I have no personal knowledge of any of the transactions or entities raised in the subcommittee's July 25 letter." Enron was clearly a major Citigroup customer (on whose behalf Robert Rubin subsequently placed calls to the U.S. Treasury Department and Moody's) -- for the CEO of Citigroup to claim "no personal knowledge of any of the transactions or entities raised in the subcommittee's July 25 letter" might temporarily keep him from being called to testify to the Subcommittee, but it raises adverse issues under the managerial resources factor that the Fed must considered in connection with Citigroup's Golden State Bancorp application.

The questions raised are not limited to Citigroup's CEO. The Financial Times of August 2, 2002, reported that "Todd Thomson, chief financial officer, told an investor conference that in the current environment, 'We would rethink a little bit going forward how we do these things.' Mr. Thomson maintained Citigroup had done nothing wrong in its dealings with Enron. 'There is nothing that we did in that process we are concerned about,' he said." Emphasis added. This blithe statement and attitude also reflects adversely on the managerial factors that the Fed must consider, ICP has commented.

Update of July 29, 2002: While Citigroup's practices are now in the spotlight, from Congress to the regulators to the mainstream financial press, the Federal Reserve Board has yet to ask Citigroup about its involvement with Enron and WorldCom, in connection with Citigroup's pending application to acquire Golden State Bancorp. In a July 29 comment, ICP has squarely raised these issues to the Fed. Click "http://www.innercitypress.org/citical.html" for an update. All the usually-gushing outlets, from BusinessWeek to the New York Times, took a few swipes at Citigroup last week -- even BusinessWeek's Amey Stone, who just completed a laughably positive bio of Citi CEO Sandy Weill. Robert Rubin's involvement, including his calls last Fall on behalf of Enron, has resulted in calls for him to appear, under oath in necessary, before Congress. The Senate Permanent Subcommittee on Investigations has asked Weill to answer nine questions about Enron, under oath, by midday July 29.

The overview of the week, we thought, was the Wall Street Journal's July 26 piece, which also reported that "CitiFinancial still adds unnecessary insurance policies onto some consumer loans -- which Citigroup denies." The record before the Fed shows that CitiFinancial encourages its employees to take "property lists" on all personal consumer loans, and to sell insurance thereon, even though Citigroup has acknowledged that it does not foreclose on these household goods. In light of Fed Chairman Greenspan's letter earlier this year to Rep. LaFalce that the Fed has the power to deem particular practices unfair and deceptive, ICP has formally asked the Fed to deem these CitiFinancial practices unfair and deceptive. Citigroup's CEO's letter released July 25 he stated: "If we find that anyone in our company has done anything wrong or fails to abide by our professional standards, we will take all appropriate actions swiftly." But note that, even as contrasted to the CitiFinancial South Carolina situations documented to the FRB in 2001, here, based on ICP's eight sets of exhibits, not a single disciplinary action has apparently been taken, despite "mystery" shopping tip-off memos, purportedly unauthorized incentive programs like "the 7500 Club," at least one refunded insurance premium, and widely disseminated training scripts that totally contradict Citigroup's public statements (and statements to the FRB) about CitiFinancial, etc.. ICP has also raised that to the Fed in its July 29 comment letter, click "http://www.innercitypress.org/citical.html" to view.

Update of July 22, 2002: on Tuesday, July 23, four senior Citigroup officials have been required to testify before the U.S. Senate's Permanent Subcommittee on Investigations: David C. Bushnell, managing director of "global risk management" at Citi's Salomon Smith Barney; James F. Reilly Jr., managing director of Salomon's global power and energy group; Richard Caplan, managing director of the Salomon's credit derivatives group; and Maureen Hendricks, a "senior advisory director" at Citi's Salomon in New York. The New York Times of July 3, 2002, at A9, reported that Citigroup violated the rules of, and paid fines to, the Treasury Department's Office of Foreign Assets Control for violating sanctions on trade and investment. In light of these matters and the systemic predatory lending that it has documented, ICP is "http://www.innercitypress.org/citical.html" that Citigroup Inc. is not "well managed" within the meaning of the Gramm-Leach-Bliley Act of 1999, and should be stripped of its powers as a financial holding company that law. Other requests to that effect will be going in to the Fed. Click "http://www.innercitypress.org/citical.html" for an update on Citi-Golden State Bancorp, and Citi's amazing withholdings and admissions. The Wall Street Journal of July 18, 2002, "Efforts by Citigroup to Reform Subprime Unit Raise Questions," beyond the "mystery shopping" scam reports that:

in its filing against the Golden State purchase with the federal regulators, [ICP] claims Citigroup still is aggressively pushing insurance products, especially on personal loans.

When it makes a personal loan, CitiFinancial often asks the holders of personal loans to provide collateral. In some cases, according to CitiFinancial documents filed by Inner City Press, that collateral includes fishing lures and tackle boxes, record albums, tents, sleeping bags and lanterns -- items that CitiFinancial would almost certainly never bother to collect in the event of a borrower's default. Yet insurance is sold on the collateral in case it is damaged or lost.

"It's predatory: This insurance product has no rationale, because it's not credible that someone would want to have their loan paid with their leaf-blower," said Matthew Lee, executive director of the Fair Finance Watch project at Inner City Press. "Citigroup has not lived up to the subprime lending reforms it announced after acquiring Associates."

Citigroup officials concede seizing such collateral would be more hassle than it's worth. But they say providing such collateral on loans has a purpose -- "to make the borrower more responsible for paying the loan back," says Ajay Banga, Citigroup's business head of consumer lending.

Consider for a moment the cynicism of this last statement, and of the underlying practice: Citigroup admits that its purpose in routinely and systematically obtaining (requiring) "property lists" is not to secure the loans. It is clear to ICP, and numerous informed sources have confirmed, that the purpose is to sell credit insurance, that has no value to the customer, by Citigroup's own concession. Ajay Banga's statement that the purpose is "to make the borrower more responsible for paying the loan back" is ludicrous, and a significant admission in light of the fact that CitiFinancial routinely and systematically sells (packs) insurance on these items (as ICP has documented, ice chests, fishing rods, CD collections, and, yes, leaf-blowers). These practices are beneath contempt; they are predatory; they require the denial of Citigroup's applications, ICP has commented.

Update of July 15, 2002: while the Federal Reserve has now asked Citigroup more than two dozen questions related to its subprime lending (click "http://www.innercitypress.org/citical.html" for an update), Citigroup was in the hot seat in Congress last week regarding WorldCom. See also, N.Y. Post of July 11, 2002: responding to questions about whether IPO shares had been set aside for WorldCom's executives, Citi's Jack Grubman said, "I don't recall. I'm not saying 'no,' I'm not saying 'yes.'" This Nixonian answer should not be allowed in Citigroup's response to the Fed's subprime lending questions, nor in Citigroup's now-overdue response to the exhibits ICP submitted on June 24 and 30 (another set of exhibits went in on July 15; click "http://www.innercitypress.org/citical.html" for summary).

Following up on our Report of April 29, 2002, below: the ex-employee of whose reason for leaving CitiFinancial District Manager Nancy Neel, in sworn testimony on July 31, 2001, stated she was not aware has continued to be targeted by CitiFinancial. Among documents that have come to light are memoranda from D.M. Jim Chakales (4/5/01, stating that the individual "has targeted all excellent customers [for refinancing]. Borrowers in this area apparently have received a list that I faxed out to all the branches where we missed opportunities of not fully upselling to 90%") and from D.M. Nancy Neel (6/21/01, requesting "a copy of all payoff requests that you have received" from the individual). The memos are significant for a number of reasons: CitiFinancial has been making it difficult or impossible for its customers to "pay-off" and switch to lower rates; Mr. Chakales' memo references the systematic "upselling" into which the Federal Reserve inquired (see "http://www.innercitypress.org/citical.html" of July 11, 2002); and Ms. Neel professed to be unaware of such pay-off requests on July 31, 2001, more than a month after her above-quoted memo. CitiFinancial has few to no "whistleblower" protections: as we showed in South Carolina (see below in this Report), when employees complain, they are fired and/or face litigation. These issues have been raised to the Federal Reserve Board... Citi's CEO will be presenting the company's second quarter earning in a conference call on July 17; these questions should be raised in that forum as well. The incongruity of last week was at the bought and paid off love-fest for Citi's CEO on July 8, an advertisement in Chief Executive magazine's issue distributed there had the CEO's face air-brushed into a bottle of wine. Meanwhile Citigroup's Marge Magner was reading from a prepared script at the OTS hearing that "with respect to allegations in various documents regarding individual borrowers... which are been published by [ICP], these allegations were subject to review... the review identified only one issue and corrective actions was taken. Additional materials have been provided more recently by the same commenter. CitiFinancial's in the process of reviewing those materials in the same fashion it reviewed the earlier ones." OTS Transcript at 210. It is important to note that Citigroup's "review" has included the brow-beating of CitiFinancial customers, and of the entire staff of CitiFinancial's Morristown, TN branch on July 8 and 9 -- that is, simultaneous with Ms. Magner reading her prepared statements. The Morristown office of CitiFinancial was essentially closed for two days of intimidating interviews, the focus of which was on how ICP obtained the documents, and not on the practices which they reflected. And the beat goes on...

Update of July 8, 2002: DC, NY, NJ - Citigroup slammed and stroked in a single day. On July 8, a formal meeting with be held by the Office of Thrift Supervision, including at its Jersey City office, on Citi's application to acquire Golden State Bancorp. Predatory lending by CitiFinancial will be front and center. Simultaneously, Citigroup SSB analyst Jack Grubman will be grilled by a Congressional committee, for his just-before-the-fall downgrade of WorldCom. Note that SSB reaped over $159 million from WorldCom since 1998 in investment banking and underwriting deals. SSB and Grubman are also facing litigation for biased investment advice on telecoms group Global Crossing; the plaintiffs' attorney says that Citi was willing to pay Grubman $20 million a year because his favorable stock recommendations encouraged firms like Global Crossing to place investment banking business with SSB. Meanwhile, Nero-like, Chief Executive magazine is lauding Citi CEO Sandy Weill as executive of the year.

In the run-up to the July 8 formal meeting on Citigroup's applications to acquire Golden State Bancorp, Citigroup on July 2 told the Office of Thrift Supervision that it would finally submit a response to ICP's and others' comments by July 3. At 4:20 p.m. on July 3, Citigroup put out a press release announcing a vague $120 billion lending commitment. The press release said that more information was available on Citigroup's web site, but that was not true, as of 11 p.m. on July 3. Also on July 3, Citigroup submitted its response to the OTS, FDIC and Federal Reserve. Half of the response consists of old documents from 2000 and 2001. In the new "Omnibus" response, Citigroup states among other things that "informing branches of the mystery shopping program has a prophylactic effect" (we'll let that one stand without comment); and that

"additional material have been provided by Inner City Press in its filings dated June 24 and June 30, 2002... CitiFinancial is in the process of reviewing those materials in the same fashion it reviewed the earlier materials that have been made available on Inner City Press' website and filed with the banking agencies. To date, it does not appear that any of the materials that have been reviewed reflect violations of policy or law."

Presumably Citigroup acknowledges, then, that its goal is to strip the equity our of as many moderate income homeowner's chief asset as possible (see last Week's Report). In closing (for now), ICP last week received some interesting Citigroup-related documents from the Federal Reserve - click "http://www.innercitypress.org/frreport.html" for that Report.

Update of July 1, 2002: In a week full of WorldCom -- Citigroup's fast n' loose analyst Jack Grubman is set to be questioned in Congress on July 8, the same day as the Office of Thrift Supervision's formal meeting on Citigroup - Golden State Bancorp -- documentation of predatory lending by CitiFinancial continued to flow in to Inner City Press, and then on to the regulators. Click "http://www.innercitypress.org/citical.html" to view ICP's fifth comment to the regulators opposing Citigroup's applications.

Among other things, ICP has also submitted documentation of a CitiFinancial "Problem Account" -- customer Betty Arnold. CitiFinancial branch manager Lisa Wilcox writes that "This is an insurance litigation case. We need to AOT this...". AOT stands for "Adjustment of Terms." The Maestro print-outs ICP has submitted reflect (3/22/02) that "This was a joint account[.] The co-borrower died[.] They had a real estate loan and a personal loan. American Health and Life p[ai]d personal but not real estate. This is going to court...". Question: why would Citi's American Health & Life pay on one insurance policy (the personal loan) but not on the real estate loan? The back-story and answer: on the personal loan the customers did not have to answer the health questions; on the real estate loans ($140,000), they did. There are indications of document forgery (i.e. CitiFinancial staff filling out the forms and answering the questions themselves). We anticipate hearing more about this loan in coming weeks.

In a response submitted on June 21, Citigroup states obliquely that "CitiFinancial branches are notified that mystery shopping can occur at any time, but they are not notified of the precise dates on which it will occur." But Exhibit 3 to ICP's June 3 Comment to the regulators was a memorandum to CitiFinancial's Southeast Division from Division leader Wendell R. Miller. In the memo, the dates of the "mystery" shop are specified, as reported in the American Banker of June 24, 2002, "Too Much Information? Citi Mystery-Shop Sparks Debate."

Citigroup's June 21, 2002, Response states that

with respect to allegations about individual borrowers, as various documents or allegations were published on the Inner City Press website, they were subjected to review by CitiFinancial's Compliance Department to determine whether there was evidence of any actions inconsistent with CitiFinancial policy and procedure... Counsel for CitiFinancial consulted with the Compliance Department about the account reviews.

Citigroup should be required to respond to the issues ICP has raised, not evade the questions by referring to some internal review. We will report on (from) the OTS' July 8 formal meeting. Now, Citi and WorldCom: WorldCom's acknowledgment last week that it hid $3.8 billion in expenses raises questions -- to put it mildly -- about the thoroughness of the due diligence that Citi's Salomon unit conducted before arranging and underwriting a $12 billion bond offering in 2001. On June 27, Salomon's Jack Grubman was subpoenaed to testify before a Congressional committee to explain why he downgraded WorldCom stock on June 24, a day before the company disclosed its accounting irregularities. In terms of Citigroup's lack of environmental standards, controversy continues to grow around the proposed Camisea oil project, located in the rainforests of the Amazon's Lower Urubamba Valley on Peru's Pacific coast. Citigroup serves as the financial adviser for the project -- and it is entirely unclear what due diligence it has performed, what standards it has applied, despite claims Citigroup has publicly made about having standards in this regard.

Update of June 24, 2002: Click "http://www.innercitypress.org/citical.html" for updates on the campaign against Citigroup's applications for regulatory approval to acquire Golden State Bancorp. Some additional news: Melbourne's "The Age" newspaper reported last week that if Citigroup reported the stock options it lavishes on top executives as a corporate expense, its reported profits would have been almost one billion dollars lower.... From one predatory to another: on June 18 Citigroup announced that former International Monetary Fund deputy managing director Stanley Fischer will become president of Citi's international unit. On June 19, Citigroup was sued, along with UBS and Credit Suisse, for alleging the banks provided money to help support the South African apartheid regime. "Were it not for the conspiracy of these financial institutions and companies, men, women, children and families would not have suffered from forced removals, forced labor, imprisonment, banishment, kidnapping, torture, disfigurement, murders, massacres, psychological trauma and terror,'' the suit says. A Citibank representative declined to comment... Also last week, Citigroup dropped its appeal to a sex discrimination verdict against its U.K.-based securities arm. See, e.g., the Evening Standard (London), June 19, 2002; compare and contrast with the Smith Barney sex discrimination case(s). Ah, what a company. ICP has raised these issues to the Federal Reserve and OTS in opposition to Citi's application to acquire Golden State Bancorp. Again, click "http://www.innercitypress.org/citical.html" for ICP's comments and updates.

Update of June 17, 2002: Click "http://www.innercitypress.org/citical.html" for updates on protests to Citigroup's applications to acquire Golden State Bancorp. Amid all the ink spilled about Citigroup's reorganization announcement last week, we most noticed the demotion of longtime Citibank (that is, not Travelers / Weill-pack) executive Victor Menezes, who had been chief of global emerging markets. That post has been taken from him, replaced by an administrative docket including "contact with regulators, merger and acquisition activities, and training for senior managers." That used to be Charles Prince III -- but now he's got finance, risk management, and human resources. More chillingly, Robert Willumstad, longtime Mister CitiFinancial, now heads Citigroup's global consumer banking and consumer finance group, and has "full responsibility for Citi's activities in Mexico and Puerto Rico." On the lobbying beat, Citigroup has hired Maura K. Solomon as a "counsel in its federal government relations division." Watch out... Again, click "http://www.innercitypress.org/citical.html" for updates on protests to Citigroup - Golden State Bancorp. The Federal Reserve's comment period runs until July 5, 2002.

Update of June 10, 2002: Citigroup remains on the move and so do we -- click "http://www.innercitypress.org/citical.html" for ICP's second timely comment opposing Citi's applications to acquire Golden State Bancorp. Citi's moves are global: it announced last week that it plans to move its China headquarters to a planned new building in the Lujiazui Financial and Trade Zone of Shanghai's Pudong district. Ground will be broken for the new building later this year, with Citi having the right to name the building. Also, last week Citi consolidated its Latin American units under Jorge Bermudez, who mused to the Miami Herald, "[o]ne of the things we're going to have to deal with is, how do we become more of a player in places like Brazil?" Citibank has 3 to 4 percent of the Brazilian market, he said. "I'd like to double the market share in relatively short time." Note: Citigroup's high interest rate "consumer finance" lender CitiFinancial is expanding rapidly, currently having 14 branches in India, eight in the Philippines, 67 in Mexico, 43 in Chile, 906 in Japan, two in Taiwan and 67 in Argentina...Again, click "http://www.innercitypress.org/citical.html" for ICP's second timely comment opposing Citi's applications to acquire Golden State Bancorp, including information regarding how to submit comments to the Federal Reserve and OTS.

Update of June 3, 2002: On May 31, ICP learned that Citigroup had rushed and that day filed its applications to acquire Golden State Bancorp, a mere ten days after the proposal was announced (see Report of May 27, below). And -- click "http://www.innercitypress.org/citical.html" to view ICP's June 3, 2002, comment to the Federal Reserve and other regulators opposing Citigroup's applications to acquire Golden State Bancorp. See also, "Activists Knock Citi on Subprime; Firm Debates Data," American Banker, June 4, 2002, Pg. 4; "Groups Oppose Citibank's Deal," Associated Press, June 3, 2002; "Citigroup's Golden State Purchase May Be Delayed," Bloomberg News, June 3, 2002. This will be updated; we will return to broader (Citi and other) reporting by June 10, at latest.

Update of May 27, 2002: In light of Citigroup's May 21 announcement of a proposal to acquire Golden State Bancorp and Cal Fed Bank for $5.8 billion, and predatory lending issues that are sure to arise in opposition to Citigroup's applications (see, e.g., the "http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2002/05/22/MN222323.DTL" and "http://biz.yahoo.com/rb/020521/financial_goldenstate_4.html" re the proposal), we turn this week to contrasts between the approaches of politicians to Citigroup and another problematic subprime lender, Household International.

Earlier this month, New York state comptroller Carl McCall issues a press release stating that Household's failure "to voluntarily come to terms with those who have been harmed by its business practices has resulted in community action to prompt the court and government officials to review Household's business practices." And last week, the "Boston City Council... asked the city's retirement board to study whether the pension plan should sell off shares of Household International Inc... A recent national class action lawsuit claimed Household routinely overcharged borrowers." Boston Herald, May 23, 2002.

Most community-based advocacy organizations, including ICP, applaud these moves for scrutiny and accountability at Household. But they raise a question: why not Citigroup as well? While both state comptroller McCall and the Boston City Council tied their announcements to litigation against Household, it's well known that Citigroup is being sued for predatory lending by not only private litigants, but also by the U.S. Federal Trade Commission. Mr. McCall's statement about Household's failure "to voluntarily come to terms with those who have been harmed by its business practices" is equally if not more applicable to Citigroup. But, wait, we forgot: Carl McCall used to work at Citibank. And more substantively, Citigroup is significantly more active than Household in giving political campaign contributions.

A routine search of the always-useful Web site FECinfo.com, for "Citigroup," reflects "34 records found in the 02 database," including, simply as examples in March 2002:

--Citigroup giving $85,000 on March 27, 2002, to the Republican National State Elections Committee; Citigroup giving $60,000 on March 22, 2002 to the Democratic DSCC; Citigroup giving $15,000 on March 5, 2002 to the Republican Governors Association Conference; and Citigroup giving $50,000 on March 15, 2002 to the Democratic DCCCC.

By contrast, "Household International" appears in the 02 Database only three times; each of the donations was in 2001 (none in 2002), and all three were to Republicans ($2,000 to NRCCC, June 29, 2001; $15,000 to RNC, April 19, 2001; and $25,000 to NRSC, December 28, 2001).

Another contrast: last week, Household issued a press release trumpeting their hiring of the Pennsylvania banking commissioner James Kauffman as its new " director of compliance for consumer lending." When Citigroup wants to buy perceived government legitimacy it hires ex-Treasury Secretary Robert Rubin, ex-IMFer Stanley Fischer, ex-Secretary of Energy Bill Richardson (temporarily), and the Federal Reserve's money laundering "guru" Richard Small. Citigroup is playing in a different league; while its practices and the scope of litigation against it are as bad if not worse that is true of Household, we have not seen announcements by state comptroller McCall or the Boston City Council against Citigroup. But the issues (summarized below on this page) will be raised in opposition to Citigroup - Golden State. Developing...

Update of May 20, 2002: As Inner City Press' investigation of CitiFinancial continues, we focus this week on how branch managers are compensated. Perhaps most significant is that, despite Citigroup's various claims to have reformed credit insurance abuses, managers' bonuses still ride on "premium per loan" imposed on real estate loans. CitiFinancial has it down to a science: on a quarterly basis, points are awarded in eleven different categories. If a total of sixty points is not reached, no bonus is given.

Twenty points can be gained by "Increas[ing] Personal Loan Net Receivables at End of Prior Quarter by 0.50%." Taking CitiFinancial's "Knoxville - Adair" branch as an example, this branch lodged an increase of 0.42% in the first quarter of 2002; it was awarded 17 of 20 possible points.

Another twenty points can be gained by "Increas[ing] Real Estate Net Receivables at End of Prior Quarter by 1.00%." Again taking the "Knoxville - Adair" branch as an example, this branch lodged an increase of 3.47% in the first quarter of 2002; it was awarded all 20 points.

Imposing credit insurance accounts for fully 30 points, broken down into credit insurance on personal loans, on real estate loans, on "Equity Plus" loans and a category referred to as "Non credit." Source tell ICP this refers to CitiFinancial's "Home and Auto Security Plans" (for which checks are written to American Traveler Motor Club -- $399.95 for 36 months). Branches, Districts, Regions and Divisions are all judged (and compensated) based on how much credit (and non-credit) insurance is sold...

CitiFinancial also closely monitors "Sales Finance Conversions." This is where CitiFinancial provides credit to retailers' customers, then tries to convert the loans into directly personal loans from CitiFinancial, or better yet, real estate loans (on which Citi could foreclose). Examining the March 2002 "Shelf Space" report for CitiFinancial's Nancy Neel (regarding whom we have previously reported), we find that in the first quarter of 2002 under Ms. Neel's watch 110 sale finance accounts were converted, while 49 home equity loans were made. The average size of personal loans was $6,279, approximately 20% of which constituted payments for insurance. Given the way Citigroup compensates its employees, insurance packing should come as no surprise...

We'll close this week with a sample loan, made earlier this year by CitiFinancial's Knoxville-Adair office at 25.33% interest. To borrow $12,316.02, the customer pays $9,518.58 in finance charges, and $1,140.61 for credit disability insurance...

* * *

Global CitiWatch: In India, Citicorp Finance (India) Ltd, is buying 24.84 per cent stakes each in the Chennai-based Sriram Investments Ltd and Sriram Transport Finance Ltd for Rs 17.25 crore.... The Czech unit of Citigroup announced on May 14 that Citi sees Czech bank Zivnostenska Banka as a potential takeover target. An 85.16 percent stake in Zivnostenska has been put up for sale by its majority shareholder, Germany's Bankgesellschaft. According to Reuters, Zivnostenska "focuses on wealthier private clients." In the U.S., rumors swirled last week that Citigroup is near buying California Fed Bank . We'll be watching.

Update for May 13, 2002: Citigroup's questionable consumer finance lending is by no means limited to the United States. Last week, CitiFinancial Japan KK announced it is buying lender Marufuku, making Citi the third-largest consumer finance company in Japan. Associates First Capital Corp.'s Japanese operations opened the door; now Citi seeks to continue to grow, in Japan and elsewhere.

Continued monitoring of CitiFinancial in the U.S. -- ICP's continuing Tennessee probe has led it into the following new cases: loan documents dated March 5, 2002, CitiFinancial charging 25.33% interest on a $12,316.02 loan. $1,140.61 of the loan is disability insurance; single premium. In all, 15.75% of the amount financed is fees and insurance. The collateral is a 1994 Dodge Caravan -- it's unclear if it's worth $12,000. But as before, CitiFinancial's purpose in assembling a property list on consumer loans it to write insurance.... Also in Tennessee, CitiFinancial customer Donny Davis on May 10 filed suit against CitiFinancial for predatory lending; we will be reporting on this case as it develops. Now, a more global round-up:

Cut and run? Buenos Aires newspaper La Nacion reported last week that Citigroup has decided to move its Argentine operations to Chile...

Lobby and buy: Citigroup's "country officer" for Singapore has told the press there that Citi would "have loved" to have bid on Keppel Capital Holdings or Overseas Union Bank last year; now the Monetary Authority of Singapore says it is reviewing its policy against allowing foreign banks to take controlling stakes in local lenders...

Update of May 6, 2002: A return for this wek to the global, and to Citigroup's rhetorical hardball. In Berlin last week, Sandy Weill said that "[w]e do a lot of things in common with Deutsche Bank. We have not yet had talks about a merger." The key word is "yet"... Pontificating about the private holders of public debt, in this case Argentina, Citigroup’s William Rhodes last week told the Financial Times that "things need to move very quickly... We specifically need to see the details of a workable scheme to unfreeze the banks... The last time we had a major sovereign-debt restructuring was Ecuador two years ago," he said, when the private sector was somewhat reluctantly corralled along by government creditors. "The amounts involved were considerably smaller than for Argentina... I am a pragmatist," he said. "Whatever works, works. What is really needed here is for a country to step forward, get together a bunch of underwriters and go for it." Yep, Citigroup sure is pragmatic...

In Hong Kong, Citigroup Asset Management is launching its "Smith Barney Select Global Business Leaders Portfolio." The fund will invest in 30 to 35 multinational corporation stocks. Player, and packager. When will it stop?

Update of April 29, 2002: world's worst merger -- will they or won't they? The New York Times of April 24 reported that in February of this year, Citigroup approached Deutsche Bank "to gauge whether the German bank would be open to a takeover offer... according to several people close to the companies... Executives from Deutsche Bank and Citigroup declined to comment on the discussions." The following day, outgoing CEO Rolf Breuer told the Boersen-Zeitung that "we have never received an offer from Citigroup, let alone refused one." He dismissed the possibility of an offer as improbable and indicated both he and chairman designate Josef Ackermann would not approve such a move. Time will tell...

Meanwhile, N.Y. attorney general Spitzer has subpoenaed all documents relating to research produced by Citigroup telecommunications analyst Jack Grubman since 1988...

Tennessee tangent: in the course of ICP's ongoing inquiry into CitiFinancial's Tennessee practices, we have sub-inquired into a pending misdemeanor charge that's been filed against ex-CitiFinancial employee Roy Cook. Our interest was piqued due to the apparently coordinated involvement of two CitiFinancial district managers, Nancy Neel and Jim Chakales, in the filing of the case. On March 14, 2001, a fax was received at several CitiFinancial offices, denouncing both Mr. Chakales and Ms. Neel, and stating among other things that Ms. Need "deserved to die." The fax header reflected that it had been transmitted from a Kinkos office in Knoxville. Ms. Neel called the local police, and CitiFinancial in Baltimore. Ms. Neel went to the Kinkos office, and a Kinkos employee provided a vague physical description of a faxer on the evening of March 14, 2001. Subsequently Roy Cook was arrested.

Roy Cook had worked at CitiFinancial since 1994, in New Jersey and then in Knoxville as a branch manager. He was terminated by CitiFinancial on February 9, 2001 -- he asserts due to his refusal to "distort delinquency" on loans and engage in other practices. Another employee in the same office, Jack Lay, resigned under threat of suspension in the time period between February 9 and March 14, 2001.

ICP has reviewed a taped transcript of a preliminary hearing held in Mr. Cook's case on July 31, 2001. The prosecutor called three witnesses: the Kinkos (by then ex-) employee who made the identification; Ms. Neel, and CitiFinancial assistant branch manager Freda Monday. At the beginning of the hearing, all prospective witnesses were told to step out of the courtroom, and not to discuss any testimony while the hearing took place.

Ms. Neel stated that after the fax was received she bought a hand gun, and that CitiFinancial paid off-duty police officers to guard six separate CitiFinancial offices for 45 days following the receipt of the fax. On cross-examination, Ms. Neel was asked if she was aware of a CitiFinancial conference call held days before receipt of the fax, at which it was announced that the compensation for ex-Associates loan officers would be decreased to the CitiFinancial level. She responded, "I am not aware." She also stated that she was not aware why Mr. Cook left CitiFinancial. When she was asked whether she was aware of payoff requests on CitiFinancial loans, the prosecutor objected, and she was not required to answer.

Mr. Chakales stated that he could or would not discuss why Mr. Cook left CitiFinancial, as it was "proprietary and confidential." Another of the defendant's witnesses, Buffy Creech, was in the hall outside the courtroom, and has made the following sworn statements:

"When Nancy [Neel] came out of the courtroom... questioning about Nancy's testimony started.... I did hear Nancy say that she told 'them,' referring to the court, 'The conference call did not take place to my knowledge. That's all you have to say if they ask you'... Nancy went away from the group and began to explain the questioning to someone on her cell phone. She told them, 'It was all bull,' and that 'I just kept saying not to my knowledge'.... Freda came out shortly afterwards. When she came out the group greeted her and there seemed to be something disturbing the group. Nancy returned the took control. Nancy said, 'Just say not to my knowledge or I don't remember'... [T]hen the Corporate Lady came out with the assistant attorney and gave thumbs up and said, 'The case has been bound over for trail. You all did a great job!' They seemed pleased and then Roy and his attorney Mr. Young came out and I reported what I saw and heard and asked if the judge did not request the witnesses not to discuss the trial with each other. Mr. Young was upset... and asked me to write this information down." Buffy Creech, Sworn to 8/7/2001

The continuing (non-) compliance practices of Ms. Neel -- most recently, refusing to provide CitiFinancial customer Jan Craig with her loan documents -- Mr. Chakales and Ms. Monday are reported on below. Since our earlier reports, CitiFinancial has sent a "team" down to Tennessee to review the allegations; no action, however, has been taken. Last week, a Wall St. Journal reporter traveled to Knoxville to inquire. In recent weeks ICP has been contacted by a number of plaintiffs' attorneys with cases against CitiFinancial, and has been informed that since the Federal Trade Commission filed suit against CitiFinancial in March 2001, CitiFinancial has adopted a different, and increasingly "hard-line," litigation strategy. "They're running scared," one of the attorneys stated last week. Not scared enough...

Update of April 22, 2002: on April 16, Citigroup faced criticism both inside and outside its annual shareholders' meeting at Carnegie Hall in midtown Manhattan. While protesters on issues from predatory lending to environmental destruction to abusive employment practices handed leaflets out on 57th Street, Citigroup made it more difficult than last year to enter the meeting. Some shareholder activists were barred, even when they had proxy letters concerning resolutions that would be voted on at the meeting. Inside, there were more empty seats than in 2001.

The meeting began with Sandy Weill alone on the stage with a Citigroup banner behind him. Citigroup's board of directors sat in the front row; two directors called in sick. The first item on the agenda was the election of directors. Skadden Arps corporate lawyer Ken Bialkin retired from the board, and Bob Lipp left along with the spun-off Travelers insurance business. The one new face was George David, CEO of United Technologies. Questions were raised from the audience about Citigroup's numerous interlocking directorships with other corporations, most notably AT&T. But there were no other nominees other than those proposed by Citigroup.

A slew of shareholders had proposed a resolution calling on Citigroup to study linking executive compensation with "addressing predatory lending practices." An ICP member spoke in favor of this resolution, noting not only the Federal Trade Commission's predatory lending lawsuit against Citigroup, but the failure by Citigroup to propose any reforms for CitiFinancial's personal loan business, in which loans are made at 25 to 30% interest rates, replete with credit insurance on personal property such as fishing rods and ice chests (these examples were given). Sandy Weill said that Citigroup is taking the issue seriously; he claimed that "many states" now see CitiFinancial as a leader in subprime lending. The resolution received sufficient votes to be on the shareholders' meeting agenda for next year; pressure will only continue to grow.

Speakers including a human rights lawyer from Peru spoke in favor of a resolution regarding Citigroup's environmental standards or lack thereof. Sandy Weill thanked various speakers for their views, but then laughed when another speaker claimed that Citigroup is not to blame for any environmental problems. No other Citigroup board member spoke during the meeting.

Each attendee was given a stack of Citigroup brochures several inches thick. Interestingly, a 44-page pamphlet entitled "This is Citigroup Corporate Citizenship" does not mention CitiFinancial or subprime lending even once. But the first substantive section of Citigroup's 2001 annual report concerns its "Consumer Group;" the fourth paragraph brags that CitiFinancial "now has the largest consumer finance operation in North America with some 2,200 branches." ICP's investigation of CitiFinancial, particularly in Tennessee, is continuing...

Update of April 15, 2002: We'll begin this week with Citigroup's U.S. consumer practices (credit cards, truck leasing, and employment), then shift to China, Enron, and the upcoming Citigroup shareholders' meeting. From the mail bag:

Subj: Citigroup Predatory Lending Through Credit Cards
Date: 4/12/02 7:04:25 PM Eastern Daylight Time
From: [Name withheld]
To: CitiWatch [at] innercitypress.org

...As a recent widow who consequently suffered a serious drop in household income, I feel that I was preyed upon by Citibank... First Citibank changed cards on me during an innocent call to customer service. I was offered a new "Platinum World Card" that was touted to be exactly the same as the cards my husband and I had held for the past ten years. The payoff for me was supposedly 5000 free miles. When I was unable to make the unexpectedly high payment on the next statement, I returned a call to Citibank collections. The woman I spoke to was so angry at Citibank that she flat out told me "You have been sold a card by Customer Service. There is no other credit card like this." She then listed some of the terms of the card: no way to negotiate alternative payment plans; balance payable upon receipt; and any balance carried jumped to 25%...

A Citigroup employee angry with the company? Well, yes:

Subj: CitiFinacial/Associates
Date: 4/9/02 9:18:03 PM Eastern Daylight Time
From: [Name withheld]
To CitiWatch [at] innercitypress.org

I am a former employee of 4 years who left the company 5 weeks ago. I was forced out after filing a gender discrimination complaint. CitiFinancial is withholding my last paycheck... I have filed a complaint with their internal dispute process on 1/29/02 and finally got a response back on 4/4/02 which stated that they have no evidence of any discriminatory activities against me. I know this is not true since my whole office witnessed these, and the auditor that discriminated against me has done so in other branches. When I filed my complaint, I told the H.R. Rep on my conference call that there have been many retaliatory acts performed against me by my direct District Manager and the Regional Manager and I was told that there was nothing that they could do, and that I needed to discuss those complaints with them directly. Well this was ridiculous since they both have pushed me out of the company.. I have documentation in regards to harassing memos and direction from upper management to disregard the policies that they have in place in order to meet our "numbers"...

And now, trucks -- from a U.S. Marine captain, no less:

Subj: Loan Fraud of Associates/Citigroup
From: [Name withheld for now -- Captain, USMC]
To: CitiWatch [at] innercitypress.org

I took out a loan on a Ryder used truck in Memphis, TN in January of 2000 for a cousin when I was in Okinawa, JA. My cousin stopped making payments on the truck and abandoned it in April 2000 forcing me to return home and make back payments on the truck. I caught the loan up on the truck and parked it because I no longer had a driver. The loan on the truck was through the Associates First Capital Corporation which was bought out by Citigroup. This company forced me to take insurance through them on the truck regardless of the fact that I was making payments and had the truck parked. To enforce me paying their insurance, they added the insurance cost plus "fees" to the payoff amount of the truck. To comply, I have been making their insurance payments for almost two years. I was in no position to question them continually on it because I am a Captain in the USMC and was stationed in Okinawa. Now that I am stateside I have begun to question them and ask them for payoff information. They at first avoided giving me the information and then gave me two quotes: one for 9200 for the balance of the truck and another of 11100 which included fees and insurance. rebuffed. It took them until December of 2001 to give me a coupon book with their billing address and the exact amount of loan payments. I have to take their word on how much I owe because they won't provide me with documentation. They report to me that my loan amount is $586/month and the insurance is $112/month. Whenever I speak with one of their reps they are rude, curt and short with me. When I told their bill collector I wasn't going to pay their insurance, they threatened to call my command. They post my payments late and charge me fees for it when I know they've been mailed in a timely fashion. What's crazier is that I went to get a loan for a house and the loan I'm getting through them isn't even reported through any credit bureau...

On April 16, protests will be held outside (and inside) of Citigroup annual shareholders' meeting at Carnegie Hall in Manhattan. One of the questions to be asked inside concerns what due diligence Citigroup performed before buying predatory lender Associates First Capital, what Citigroup is in fact doing as reports grow of the non-implementation of supposed reforms, and what safeguards, if any, apply to Citigroup's growing subprime lending outside the United States... There will be Enron questions, too:

The amended complaint in the Enron class action suit provides further specifics of Citigroup's and Robert Rubin's lobbying for a bail-out. According to the amended complaint, in early November Rubin lobbied Treasury Undersecretary Peter Fisher for a bail-out of Enron. Then in late November, Rubin tried to lobby Moody's Investors Service not to downgrade Enron's ratings. A Moody's official testified last month that Rubin called the agency. The amended complaint also states that Citigroup executives were allowed to invest $15 million in "the very lucrative" LJM2 partnership "as a reward for Citigroup's participation in the scheme" to use the partnership to conceal debt and inflate profits; Citigroup lent Enron $2.4 billion disguised as pre-paid swaps that were channeled through a Citigroup subsidiary in the Cayman Islands, the complaint says. "Keeping Enron's stock price inflated was important to Citigroup," the lawsuit said, "as it knew that if the stock price fell below certain trigger prices," Enron would have to issue millions of additional shares to the partnerships, jeopardizing its credit rating and precipitating bankruptcy...

The revolving door between the Federal Reserve and Citigroup works both ways: Laricke D. Blanchard, a vice president and counsel for federal government relations at Citigroup, starts this week in the congressional affairs office of the "http://www.innercitypress.org/frreport.html". Citigroup hired the Fed's "money laundering guru" Richard Small; now a longtime Citigroup lobbyist becomes the Fed's lobbyist. The lines get murkier and murkier...

Finally, for this week: a month after getting a license for retail banking in China, Citigroup is being sued for excluding all but the most affluent customers there. Citigroup has set a minimum deposit requirement of U.S. $5,000; a monthly service charge of $6, or 50 yuan, is being imposed on accounts with less than that balance. In Shanghai, Wu Weiming has filed suit against the bank. "This is discrimination against customers with small and medium-sized accounts. This practice is not in accordance with China's banking or consumer protection laws," Mr. Wu said. He'd wanted to make a deposit of US $800 and objected to the bank's fees. It was suggested he open an account at another bank. The suit against Citibank was brought in the People's District Court for Pudong in Shanghai...

Update of April 8, 2002 -- From the files of FTC v. Citigroup: not surprisingly, Citigroup has opposed the FTC's Motion to Compel Production of Documents. Citigroup chides the FTC for "provid[ing] to a Wall Street Journal reporter a copy of the motion with the attached declaring of a former Associates and CitiFinancial employee... Incredibly, the FTC, which had possession of the declaration for three weeks prior to filing its motion, failed to produce this same declaration to Defendants...". On the CitiFinancial issues, Citigroup claims that it should not have to produce documents relation to "CitiFinancial's sales training, advertising and loan solicitation practices, and employee compensation" (FTC Requests 62-66), arguing that these "are not reasonably calculated to lead to the discovery of admissible evidence."

In recent weeks, Inner City Press has reported on loans made in March 2002 by CitiFinancial. This week we'll focus on a loan that CitiFinancial acquired along with the Associates. It's a loan that Associates' First Family / Allied Credit made to Ms. Jan Craig of Powell, Tennessee. The loan was made while Ms. Craig was medicated -- in fact the loan was taken out by a relative of Ms. Craig, without her knowledge. Nevertheless, on January 26, 2001, CitiFinancial wrote to Ms. Craig "welcoming" her to CitiFinancial, and stating that "nothing about your loan has changed." Ms. Craig continued to contest the loan, but CitiFinancial kept demanding and receiving payments. Suddenly, on March 26, 2002, Kim Van Airsdale, CitiFinancial's Manager of Foreclosure/REO in Baltimore, directed branch manager David Johansen to "suspend foreclosure" and "pay off the account" in full. Ms. Van Airsdale's "privileged and confidential memo" informs Mr. Johansen that "though it is not necessary to obtain permission for this plan from the borrower, the designee should attempt to convey our intentions to the borrower."

On April 4, 2002, Ms. Craig went to CitiFinancial's office. She had not yet received notification of the plan; she offered to make a payment, and asked to see her file. She was told that her file was not available, and Mr. Johansen indicated a willingness to accept her payment. Subsequently, she was told that the loan was being forgiven "because you're sick." The previously reported-on District Manager Nancy Neel was present -- in fact, Ms. Neel was in charge of this loan through much of its payment history. Ms. Craig asked, "what about the money I've paid you on the loan?" No offer has been made to refund that money. Note that CitiFinancial accepted at least $1,100 in payments on this loan....

In other CitiFinancial news, an April 1 memo to all branch managers informs that that "[t]he marketing department is working with Hollander, Cohen and McBride, an independent research firm, to conduct a research study on early customer payoffs... Over the next couple of weeks, Hollander, Cohen and McBride will conduct 3-5 minute telephone interviews with our customers and branch personnel to help determine why customers are paying off their CitiFinancial accounts early."

Here's a guess: because CitiFinancial changes interest rates as high as and over 20% to people with prime credit ratings (e.g. FICO scores in the mid-600s and higher). When they learn how badly they've been ripped off, they leave -- if CitiFinancial branch personnel allow them. Often, these branch personnel refuse to fax out payoff documents, and otherwise try to keep the customer trapped with CitiFinancial...

In environmental news, neighbors of the Shattuck Chemical Co. in south Denver are questioning the U.S. EPA's proposed $7 million cap on the cleanup costs for its owner, Citigroup. The project, which has already fallen behind schedule, is expected to cost no more than $35 million, but residents are worried that the costs could rise above the EPA's estimate... Last month, the Denver Post reported that Federal officials have begun an investigation into whether EPA Administrator Christie Whitman is making decisions on pollution cases to benefit Citigroup, to which she has family financial ties. The EPA's Office of Inspector General says it's doing the investigation, and consulting with the Justice Department's Public Integrity Section. That scenario was confirmed by the Justice Department. Hugh Kaufman, EPA's in-house watchdog, said that Whitman tried to dissolve the EPA national ombudsman's office, where he works, so it wouldn't interfere with a court settlement with Citigroup about Shattuck. Kaufman said that Whitman was motivated by her family financial ties to Citigroup. Whitman's husband, John, worked for Citigroup and still has company stock valued at $250,000. He is now managing partner of Sycamore Ventures, a venture capital firm spun off from and backed by Citigroup...

In the Far East, China's only privately owned bank is reportedly being courted by Citigroup. Last week the China Daily quoted Minsheng Bank vice president Wei Shenghong as saying the bank is having "wider talks with foreign investors, and Citibank
and HSBC are among those we are considering." Citigroup Inc unit Citibank's China office spokeswoman Grace Guo said the bank is unable to comment on reports that it is in talks with Minsheng...

Update of April 1, 2002: from CitiFinancial in Tennessee, documentation of troubling practices continues to flow in. A print-out from CitiFinancial's Maestro computer system reflects an attempt on March 21, 2002, to "upsell to $7,500 on personal loans but he only wanted the $5,000. And had received mail solicitation for payment of $129.68, that's what we wanted." One might ask: what's the problem with offering a customer a larger loan than he or she requests, with a larger monthly payment than the one offered in CitiFinancial's mail solicitation? Well, for example, documentation has also arrived of Requests for Legal Action submitted by CitiFinancial's Athens, TN branch to the Baltimore headquarters in mid-March. In one case, CitiFinancial has a $8,800 loan secured by a 1986 Dodge Caravan (that's a 15 year old vehicle). In another, CitiFinancial has a $6,000 loan secured by a 1987 Ford Ranger.

What are the interest rates on these loans? ICP has obtained the "Internal Use Only" closing script for a loan CitiFinancial made to Lee and Jaime Sullivan on March 22, 2002. The script describes insurance as "payment protection products," and the Sullivans end up with a $631.23 payment for Joint Credit Life, and a $1,261.20 payment for Joint Credit Disability. All this for a loan for under $7,000, at an interest rate of 27.59%.

Another indicative transaction: on March 20, 2002, CitiFinancial branch manager Robert Knight asks for approval to raise a customer's interest rate from 18.99% to 20.99%, in exchange for a "new advance" of a mere $700.

Why are these things done? Well, ICP has obtained a handwritten "Rah Rah" sheet announcing a loan-making competition between Regional Managers David [Baer]'s Destroyers and Tim's Tornados [sic]." The notation reads, "The Tornado's [sic] are in the R[eal] E[state] business while the Destroyers have a handle on P[ersonal] L[oan] production. None of that matters however. We start the Big Event with no points and the victory will go to those that step up across the board. Who will it be?"

Who indeed. ICP has also obtained a "Real Estate Blitz Tracking Form," with columns for "Number of Calls Made," Number of Contacts with Customer, Number of Applications Taken, New $ of Applications Taken. Some may call this churning and flipping; CitiFinancial Tennessee calls it "Blitz," or The Big Event.

We have received a letter from a current CitiFinancial employee, who remains anonymous "for fear of being fired by CitiFinancial," but writes: "Nancy Neel and Jim Chakales the two district managers here are very worried about their jobs and they should be. They continue even today ordering us to abuse customers... I have personally witnessed cases of forgery where they hold a blank document up to a window and trace a customer's signature to it. Jim Chakales was even standing there on one occasion as an employee did this... We still do field calls just like you said and then Chakales and Neel tell everyone to lie on mileage reimbursement reports. Employees have been told if they don't do as they are told they will be fired. I am currently looking for another job and when I quit I will give my name." And the beat goes on.

* * *

From the world of business hagiography, coming in May is a send-up biography of Sandy Weill, entitled "King of Capital." Current BusinessWeek writer Amey Stone is putting it together; its pre-publication blurb promises "valuable insight into the strategies and tactics of this admired dealmaker-including his ability to turn a workforce into a family, with all the love, loyalty, battles and heartbreaks... [C]owed by Bensonhurst bullies as a child, hazed as a military school plebe, intimidated by the strong personalities of some his early partners, [The King] has defied all expectations to become a CEO whose deals have had lasting impact on global finance and the economy." Yep - even since bringing down the Glass Steagall Act by an illegal merger and campaign contributions, in the past two years, buying Associates First Capital has legitimated predatory lending; buying Banamex has expanded these practices to Mexico. And those are only two examples. The blurb does not inspire confidence in the forthcoming book, but we'll see...

Update of March 25, 2002: Citigroup's foreign policy -- in Tokyo last week, Sandy Weill told reporters, "I don't think that we see us growing through acquisition of branches but through the opening of branches on individual basis. Nothing prevents us from growing branches but what we would plan to do here is to grow our branches as we think the business will warrant." Citigroup has 20 branches in Japan. The L.A. Times of March 22 mused that Citibank's foray into China "is reminiscent of 1902, when under the name International Banking Corp. it was the first American bank to set up shop in colonial Shanghai's waterfront financial center. It fled China after the Communists took power in 1949 and returned in the 1980s when market reforms reopened the country to the outside world." on March 20, Robert Rubin met with Japanese prime minister Koizumi. "I think the speed in which Japan is dealing with the reform of its financial system and reducing non-performing loans is slow," Rubin told Koizumi, according to the Nihon Keizai Shimbun. UPI noted somewhat naively that "[i]t is rare for the head of a private company to gain access to the prime minister for official meetings." Yes -- it's both rare and inappropriate.

Tennessee update (this week re failure to release mortgages and customer intimidation). Ms. Lois Vanderhoof got a mortgage from CitiFinancial's Crossville TN office and was sold insurance for which she did not qualify, due to a health condition. She did not answer the health question on her insurance form -- but someone in the CitiFinancial office did, on their copy. When she was refinancing her mortgage the Crossville office was called about a lien which was recorded in July of 2001 by that same CitiFinancial office. Ms. Vanderhoof had rescinded but they never released the lien. When Ms. Vanderhoof fell behind she told them she was refinancing her mortgage but they continued to call her and threaten her with foreclosure. The CitiFinancial district manager Bill Bonds was called and informed, but did nothing about the threats or insurance fraud. Ms Vanderhoof is still waiting for a refund...

According to sources, Mr. Leroy McDermott filed a complaint with the TN Dept of Financial Institutions against Robert Knight of CitiFinancial's West Knoxville office, for insurance packing. Mr. Knight put over $7,000 worth of insurance on Mr. McDermott's loan which raised his payoff. Mr. McDermott was offered an 8.5% rate by Mr. Knight in 2000 and when he went to sign documents it was bumped up to 9.9%. Mr. Knight said it was due to the appraisal coming in low -- but at the time Knight offered 8.5%, CitiFinancial's lowest rate was 9.9%. Mr. McDermott was not told about the insurance until the day of closing and was not told it was optional. He has filed the complaint with the TN Dept of Financial Institutions; CitiFinancial's response is due by the end of March.... .

Update of March 18, 2002: While Citigroup's CEO, as disclosed in SEC filings last week, was paid over $30 million by the company in 2001, the complaints of Citigroup's predatory lending and unprofessional employment practices continue to flow in. This week we'll focus on Alabama and Michigan. From Alabama:

Subj: Treatment by CitiFinancial
Date: 3/14/02 4:48:11 AM Eastern Standard Time
From: [Name withheld at this time]
To: CitiWatch [at] innercitypress.org

Tenants received a letter from CitiFinancial notifying them of a pre-approved home equity line against the address where he rented. They gave the letter to me. In the presence of the tenant, I called the telephone number for the local office in Huntsville, AL asking for the person that had signed the letter. I asked Steve Presnell, the local manager, about their (CitiFinancial) criteria for screening the applicants and granting credit. He talked with me for a few minutes and became defensive, then accused me of misrepresenting myself as the recipient of the letter. He had never asked me my name, only assumed I was the addressee. My concern was the integrity and scruples of a company that would send pre-approved credit to tenants living in rented houses. When he became rude and abusive, I hung up the phone. I did however send a complaint to the Better Business Bureau in Huntsville AL and to CitiFinancial web address. Later I got a letter from a corporate lawyer, (cc'd to the tenant and the BBB) with what I considered to be information in violation of the Privacy Act of 1974 and credit reporting violations, regarding the complaint and payment history of my tenants, identifying the people as basically deadbeat cranks. The tenants who gave the letter to me had always acted responsibly and in good faith in our business dealings. I am still concerned about the screening process that the local CitiFinancial office uses in granting credit secured by real property...

From Michigan, re Citigroup's Primerica unit (long, but we think worth it):

Subj: Citigroup woes
Date: 3/15/02 5:21:47 PM Eastern Standard Time
From: [Name withheld at this time]
To: CitiWatch [at] innercitypress.org

I wanted to share my own fun experience with the good folks at Citigroup. This was actually with one of their sub-subsidiaries, and occurred March 7, 2002. For the past few months, I have been testing the waters for a job change. I received a phone call from Chris Parker. She left a message on the answering machine stating that she was part of a company called Parker & Associates, which was a subsidiary of Primerica, or PFS as she termed it, a subsidiary of Citigroup. She also left her phone number and asked me to call regarding a job interview. When we spoke the next day, Chris told me that she found my resume on Monster.com and wanted to call me for an interview for one of three positions their company had open. We scheduled for 7 pm March 7, 2002. I got my haircut and bought a new outfit for the interview. I arrived about 5 minutes early and went into the building at 11111 Hall Road, Suite 11, Utica, Michigan 48317, (586) 323-7050. As instructed by Chris, I took the elevators to the basement. There was a woman in the elevator with me, also going to the basement. I thought this was odd as I expected to be interviewed alone and it was seven at night. When we exited the elevator, there were several people in the hallway, moving into a room off to our right. Across from this room was a woman, asking people's names and filling out and distributing name tags appropriately. When she asked my name, she also asked who "referred" me. I told her: Chris Parker. This was when Chris introduced herself to me, then to her husband Jeff Parker. I was shown into the room, in which there were about 20 people, and two video monitors in upper corners. There were a couple speakers, who told us all about the wonders of investing with them. Then we were informed of the compensation, as a contract policy pusher, that one could expect, and how much better it got as one slithered up the ladder. I waited through this presentation. We were given cards to fill out, which I did. As the meeting broke up, Jeff Parker approached me and asked if I would like to know more about these "opportunities." I said that I would. We went to a cafeteria area to talk. Jeff told me a bit more about how they operated, then I asked about the "job positions" and explained that when Chris and I spoke, she gave me the impression that I was showing up for an interview for a job. Jeff then told me about the three positions, which are but positions in the mercenary ladder of this organization. The first is as a trainee, where one goes out with a second level person and sells policies to clients. The trainer is at the second level, and makes more off these policies than the trainee and can work with multiple trainees. The manager, then, is one who opens their own "branch" and has trainers and trainees beneath her or him. All compensation, I was informed, was contractual. I made ready to leave and Jeff informed me of an orientation session happening at 11a.m. March 9, 2002. I declined to attend the orientation session. But Jeff Parker made sure to call me, right about 12:30p.m. that day. I told him of my disappointment with their misleading information. He told me that I had been told to come to an "overview" not and interview. I proceeded to tell him about my dissatisfaction with their recruitment techniques...

Tennessee update: source indicate that Chattanooga CitiFinancial manager Carter Payne continues to do money-collecting "field calls" in violation of the company's stated policies, and that the investigator who CitiFinancial sent down, Keith Black, questioned Jim Chakales, Nancy Neel, May Maughn and Freda Monday (each named in ICP's previous Reports, below), but that Mr. Black "wasn't concerned with the violations relayed in [ICP's] article but was concerned about how [ICP] got it." Some investigation... As was initially the case in South Carolina last year (see below), it seems more like a cover-up, or an attempt to plug leaks rather than reform practices.

Finally, for this week, the New York Stock Exchange is investigating how Citi's Salomon Smith Barney handled the accounts of WorldCom Group employees, who claim their Salomon brokers encouraged them to exercise their stock options and keep their portfolios highly concentrated in WorldCom stock. The employees also claim the brokers pushed them to buy more WorldCom stock on margin -- borrowing money from Salomon, using their WorldCom stock as collateral. Sound like a nice post-Enron inquiry..

Update of March 11, 2002: On March 5, the Federal Trade Commission filed a detailed motion in its ongoing litigation against Citigroup and CitiFinancial. The motion was reported in the Wall Street Journal of March 6, in a story which leaves the impression that the majority of the issues concern the practices of Associates First Capital Corp. before Citigroup acquired it in November 2000. But the FTC's motion and an affidavit by Michele V. Handzel, who worked at CitiFinancial for a year following Citi's acquisition of Association, contain much that is relevant to CitiFinancial, and to practices which continue to this date. And Inner City Press' ongoing inquiry into CitiFinancial's practices in Tennessee confirms and uncovers facts that go beyond those asserted by the FTC.

We'll begin with Tennessee. Documents obtained in the past week include a print-out from CitiFinancial Maesto computer system reflecting the type of "field call" which is supposedly no longer taking place at CitiFinancial. Next to the date 2/20/02, the notation is made: "Need to go by his house." Source indicate that harassing "field calls" continue to this date, often mischaracterized as "inspections of collateral." The extent of field calls is documentable through employees' "mileage reports."

CitiFinancial Regional Manager David Baer in a memo dated 2/25/02 instructs District Managers that CitiFinancial's "policy is that all R[eal] E[state] loans are presented to customers at max[imum] L[oan] T[o] V[alue ratio]. If the branch cannot sell you get involved... If you cannot sell Joe or myself must be involved.. Make it happen." Sources indicate increasing pressure to make the largest loans possible to customers -- so that no equity without a lien on it remains in the customer's house. This is also a way to deter customers from refinancing with other lenders at lower rates.

On a particular loan on which we have previously reported, to Peggy Bryant and Carolyn Wilson, CitiFinancial's computer system indicates that when the customers sought to payoff their loan and refinance with another company, CitiFinancial staff "could not reason with her... called customer adv[ising] her she would be paying broker fees, appraisal fees, points and so forth. She does not care, says she is getting a lower payment and getting life insurance too... I tried to talk her out of this..." The next day it is noted, under the rubric "Sales Offer: Save a payoff" that the customer was "in office requesting all insurance be cancelled on her loan. Claims she was advised by someone to do this."

As Inner City Press has previously reported, Caroline Wilson and her mother Peggy Bryant applied for a $66,000 mortgage from CitiFinancial's office on Clinton Highway in Knoxville. They were told that no loan would be issued without them also taking out credit insurance. Due to the insurance packed in to the loan, after twelve on-time payment, their pay-off amount grew to $72,000. This loan was written by CitiFinancial's Maye Vaughn. CitiFinancial's Nancy Neal, and district manager Jim Chakales, were both told of this, as was CitiFinancial's 1-800 customer service number. But nothing was done.

What we are seeing is that the "reforms" that CitiFinancial has announced are not being implemented, or are much less meaningful that Citigroup has claimed. Citigroup stated with fanfare that it was discontinuing single premium credit insurance -- on real estate loans. But such insurance and "ancillary products" continue on CitiFinancial's many personal loans; employees are still in February 2002 being directed to present customers with loans with loan to value ration "maxed-out," and hurdles are thrown up to prevent customers refinancing with other lenders are more favorable terms. Why are the regulators unaware of this? A sample reason is set forth in the affidavit of Michele Handzel, filed by the FTC last week. Among other things, Ms. Handzel states:

After September 2001, using the [Debt Relief Plan] on Maestro made it easier to me and other employees to automatically include credit insurance in the proposed monthly payment quote. We no longer had to manually calculate how much credit insurance could be slid into the loan without exceeding the proposed monthly payment; Maestro automatically performed this calculation... CitiFinancial put much more pressure on employees than Associates did to include as many credit insurance products and ancillary products as possible on every loan... Branch Managers, such as myself, were required to come in during loan closings if a branch employee was having trouble selling the insurance... Collections practices were more aggressive at CitiFinancial than at The Associates. CitiFinancial had a policy whereby loans were charged-off after two months of delinquency, rather than six months like at The Associates. Thus, there was a greater urgency to collect on a delinquent account before having to charge it off. Consequently, this policy also results in more flipping because the company did not want to lose the accounts and the profits generated by those accounts to a charge-off.... [W]e were given a mouse pad which we were required to keep on our desks near our computers. The mouse pad contained instructions on how to automatically include credit insurance on loans when soliciting customers over the phone... CitiFinancial instructed us to remove the mouse pads from our desk when banking examiners came to audit my branch in May 2001.

It is important to note Ms. Handzel's statements about CitiFinancial practices that are even more anti-consumer than "http://www.innercitypress.org/citiafcc.html"' were. But the last above-quoted statement -- that "CitiFinancial instructed us to remove the mouse pads from our desk when banking examiners came to audit... in May 2001" -- is the portion of Ms. Handzel's affidavit that raises the most troubling questions. The Federal Reserve Board in mid-2001 announced (in its "http://www.innercitypress.org/citieab.html" order) that it would be conducting an on-site examination of CitiFinancial. There is now sworn testimony that CitiFinancial attempted to defraud the examiners. What will the Fed do about CitiFinancial and Citigroup? How can the Fed continue to defer to financial holding companies' own compliance and risk-assessment programs? Developing...

From the mail bag:

Subj: Oh How True!
Date: 3/8/02 8:17:46 PM Eastern Standard Time
From: [Withheld at correspondent's request]
To: CitiWatch [at] innercitypress.org

I read the March 4th letter from the Citigroup employee titled "Citibank Labor Practices". I am an employee for the Travelers Insurance and reading that letter made me think that the author must work in my office. He commented that he feels as is he's in a "bad dream", I would more liken my work conditions to a nightmare! I was also made to sign the consent agreement under the threat of termination forgoing the option of bringing suit against the company. Everything he said about the compensation, the managers, the systems, the attrition and simply stressed out environment is exactly what I experience day in and day out at my office.

Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of March 4, 2002: At a panel discussion at the National Press Club on February 28, Citigroup's new director of CRA emphasized that Citibank is not the largest bank in the U.S., as it has only 400 some branches... She declined to comment on the below-reported Tennessee practices of CitiFinancial.

In a February 21, 2002 letter, CitiFinancial general counsel Linda Davis writes, "We are aware that a complaint was filed against CitiFinancial on February 6, 2002 in the Circuit Court for Knox County [Tennessee], and we will be responding to the details of the complaint in that forum... Our company prides itself on operating under the highest of professional standards, as we strive to meet the needs of our customers every day. In fact, we view our role of setting high standards in the industry as a very important one. Furthermore, we take allegations of impropriety seriously, we investigate allegations as needed, and where appropriate, take action, accordingly." We'll see...

Meanwhile, Citibank last week agreed to pay $1.6 million as part of a settlement with 27 states and Puerto Rico over the way telemarketing firms sell products and services to the bank's customers, the Illinois Attorney General's Office tells CardLine today. Citibank hired telemarketing firms to sell products to Citibank customers. Customers complained that the telemarketing firms charged them for products they did not agree to buy... Citigroup also settled, for $7.75 million, allegations that a broker from its investment bank mishandled San Bernardino County, Calif.'s investments. San Bernardino charged in a complaint 18 months ago that former county officials paid unnecessary commissions for mutual fund purchases to Salomon and former broker Peter Morrison. The county officials allegedly received kickbacks, including paid trips to Greece and other gifts, to steer business to the company, the complaint said...

Finally, for this week, from the mail bag:

Subj: Citibank Labor Practices
Date: 2/27/02 10:36:42 AM Eastern Standard Time
From: [Withheld at correspondent's request]
To: CitiWatch [at] innercitypress.org

Due to Citigroup's propensity to identify and punish employees who choose not to be deaf, dumb and blind, please allow the writer of this letter to remain anonymous.

I have been reading with great interest the continued corporate behavior of Citigroup on your web site. Thank you for the very informative insights into one of the most predatory and abusive corporations in America. I am an employee of Citibank's Internet support group and have seen for myself the depths this bank will go to. I, like thousands of other employees, was forced to sign a consent agreement under threat of termination forgoing the option of bringing suit against the company. We were never given an opportunity to have it reviewed by a third party. It was an immediate sign now or be fired proposition.

As far as how my department operates, I can only liken it to being stuck in a bad dream which only gets worse as time goes on and waking up is not an option. The department managers are totally incompetent and have absolutely refused to communicate with the workers. Their contemptible attitude toward customers and employees alike is pervasive and ultimately cripples any chances of progress. Our worker attrition is over 50% in just the last year with no replacements in place while we have been made responsible for supporting 24 various financial web sites, all Citibank and AT&T Universal Card consumer credit cards services, and various other services such as Billmanager, Wireless account access, Secure messaging, Card/chip reader, and many more.

The growth in our products and 20 fold increase in our responsibilities has not triggered any discussion of increased compensation. Not only are we not offered any incentives of any kind, performance-based or otherwise, the company is still devising ways to prevent workers from earning decent annual raises. They have tightened employee grading and evaluation criteria to almost unachievable levels, guaranteeing no more than two or three percent annual raises at most. Added to this situation is the fact that many of the products and systems fail constantly due to faulty design and maintenance. Human errors throughout the organization abound, ultimately affecting thousands of customers. We simply spend a good part of our day repeatedly apologizing to customers. Every day is absolute chaos. As workers, we understand the only things that really matter to the company are the shareholders, the stock price and the CEO's annual bonus. Customers and employees are simply not included in the business model equation. This ongoing situation in the workplace should be investigated by the Department of Labor. No worker can or should be expected to do or know so much as we are and not be compensated fairly for sustaining these expectations. It simply is impossible to be proficient at so much yet that is exactly what is being demanded of us. Here, everything is sacrificed for the bottom line. Even the bottom line.

Until next time, for or with more information, "http://www.innercitypress.org/contact.html".

Update of February 25, 2002: As the previously-reported on issues at CitiFinancial in Tennessee continue to develop, we turn this week to Citigroup's notably different accommodation on environmental issues. Newsweek of February 25, under the heading "pin-striped protesters," reports that " this new alliance is evident at Citigroup, which has been on activist hit lists for years for underwriting the controversial Three Gorges Dam in China. Rather than rally outside the bank, Friends of the Earth organized a "dialogue group" that included other activists, green fund managers and Citibank. In a letter dated Jan. 28, Citigroup described a number of changes it has made in its environmental policy, most notably a checklist on environmental risks that project finance teams must include in the deal file along with a credit assessment. On Feb. 13, Trillium dropped a proposed shareholder resolution that would have required such a document."

While we're aware of the benefits (sometimes) of so-called good cop, bad cop strategies, we note that Citigroup and its Salomon Smith Barney have yet to impose any meaningful "checklist on [predatory lending] risks" to consider before doing underwriting for, and enabling, standardless subprime lenders. A senior Citigroup official has said that such a checklist on lending issues is not necessary, since SSB's role is akin to a power grid (like Enron), just "moving the stuff around." And, among our focuses in 2002, Citigroup is engaged in problematic high-rate lending in the same countries in which it will purportedly apply this environmental checklist...

In a parallel universe, Citigroup on February 20 held a reception honoring Janet Thompson, who has been part of Citi's Community Reinvestment Act team since 1975 and who retired last month. The reception was held on the 50th floor of Citi's skyscraper in Long Island City, Queens. It was a nicely run affair, with much praise of Ms. Thompson, including from Citigroup COO Chuck Prince, Pam Flaherty, and the director of a non-for-profit organization. Issues of subprime lending -- CitiFinancial's, and that of Associates First Capital Corporation -- were not mentioned. There was something slightly unreal about the proceeding. It was is if Citicorp has not sold itself to the hard-charging, subprime-lending Travelers Group in 1998, had not acquired Associates in 2000, and Banamex in 2001. It was a blast from the past, a sort of last hurrah. Very tastefully done, however. And we do wish Ms. Thompson well, even though in her farewell speech she referred to advocates who questioned Citi's mergers as "nuts." Ms. Thompson represents a simpler -- a kinder and gentler -- era as Citi, when it was Citicorp. The new, post-Travelers era is quite different.

Now on the other side of the revolving door, ex-Federal Reserve and now Citigroup money laundering "guru" Richard A. Small spoke earlier this month before the ABA's Risk Management conference in San Diego. Smallness was among his topics: ''A $100 withdrawal from an ATM doesn't show up on anybody's radar screen,'' he said. But how about Citigroup's transfer of well over $100 from the United Arab Emirates to the hijackers' accounts at SunTrust in Florida? As another revolving door player, Robert Rubin, does, Mr. Small adopted the tone of a public policy maven, not just a representative of a particular bank: ''What we hope will happen from all this is that we can devise some patterns or trends that we can then distribute to the industry,'' he said. Does he mean that Citigroup (that is, "we") hopes to "devise some pattern" and "then distribute [it] to the industry"? ''It's tough,'' Mr. Small concluded. Yes, cashing in directly from government service to the largest company you used to regulate is tough indeed...

Can't tell the players without a scorecard: at the February 20 event, it was learned that Chuck Prince has been shifted to responsibility for "emerging markets." In the pre-speech chit-chat session, certain more human details about the CRA team of Citibank emerged: stakes in racehorses, a love of sailing, interests in public policy. In terms of the changing roster, ex-CitiFinancial general counsel Martin Wong has been elevated to responsibility for compliance within Citigroup more general; Linda Davis is the new general counsel of CitiFinancial. What action will be taken on the facts emerging about CitiFinancial's practices in Tennessee and the southeast remains to be seen.

London's Sunday Times of Feb. 24 reported on e-mails between Allied Irish Banks accused "rogue trader" John Rusnak and a trader at Citigroup, "appearing to show collusion... The trader at Citibank told Rusnak, 'This cannot go on much longer'," a source is quoted as saying...

Update of February 18, 2002: While the New York Times (2/11/02) sings the praises of Robert Rubin, calling him a public policy man who just happens to be lending his credibility to Citigroup, Inner City Press' inquiry into CitiFinancial's practices continue, right now with a focus on Tennessee. Further documents received include a memorandum to CitiFinancial's Southeast Division from Division leader Wendell R. Miller, dated November 20, 2000. That is, during the pendency of Citigroup's applications to acquire Associates First Capital. In the memo, Mr. Miller tells all branch staff when to be expecting (and to be prepared for) the "mystery shopping test" that Citigroup had told its regulators would be performed. The dates of the "mystery" shop are specified, as well as what will be tested for: "do we quote the same rates, LTV, etc." The implication is, be sure to keep the offers consistent during the duration of the test; not to worry, it will end in January 2001. The memo was cc-ed to Tim Baechtold, Division Operations Manager, and to K.C. Mead and Ed Starkey.

Another memo, this time for Regional head Jim Chakales, reveals the interest rates charged to different tranches of CitiFinancial customers for "Equity Plus" loans. These are home-secured loans, and yet customers with "excellent" credit histories are changed 18.99% interest. Those with "average" credit histories are charged 20.99%; those with "Weak/Fail" credit are charged 23.99%. All of these loans are secured by the borrower's home....

Beyond predatory lending, the documents provide an insight into the under-reporting of delinquency at CitiFinancial. Pressure is brought to bear on loan officers to make a minimum of 20 loans a month. When some of these loans fall into delinquency, this is cured by issuing new loans, or by advancing the payment-due date, sometimes by making a payment as small as five dollars. In a memo, South Central Region head Bill Davis informs all district managers that "I want each of you either in the branch that is having the biggest problem with delinquency or in your base tomorrow working delinquency. I want to know what each of you plan [sic] to do to get us back to our original projection. An increase in Personal Loans is unacceptable. Until we get our delinquency back in line and start getting our benefit of charge off, we will be working every weekend."

As reported last week, delinquencies are also under-reported by granting "tornado deferments" even when there has been no tornado.

On CitiFinancial's Maestro computer system, Regional head Jim Chakales urges "Run them down today and cure payment def[iciency], RBO whatever but please do not wait until last minute. Set a goal you need by Fri each day and do it, Jim." In another Maestro posting, Chakales instructs "Make sure you put in the right hours needed to get your delinquency worked properly and contact made, I am disappointed in what I saw, Jim."

A CitiFinancial audit found a variety of errors and worse:

"The first mortgage balance of $69,500 was falsified and lowered to $46,000 during the verification process in order to lower the loan-to-value (LTV). As a result, the recalculated LTV of 107% exceeded the maximu7m approved LTV of 80%." (Holland)

"Income used to qualify the loan was not verified. Based on the verified income the recalculated ability-to-pay (ATP) of 23% (Springer) and 21% (Childress) is below the minimum requirement."

"The loan did not adhere to Tennessee state regulations, as the $150 title search fee and points were charged to the borrower."

"The following RESPA requirements were not adhered to: the title search fee or the title insurance was not disclosed on the Settlement Statement. The points were not disclosed on the Good Faith Estimate. There was no evidence the branch provided a copy of the Customer Handbook on Adjustable Rate Mortgages to the borrowers. It was determined that the branch does not stock the handbook. The Section 32 Mortgage Disclosure form was not in the file."

"Our review of fourteen accounts with waived late charges noted twelve instances where the branch waived late charges when payments were made or issued a disbursement from the income account (INC55) and posted it to the account in order to advance the paid-to-dates. A distortion of delinquencies is considered to have occurred, as the accounts would have been carried past due."

We will have more on this as it develops....

Update of February 11, 2002: We'll focus in more detail on the emerging Citigroup predatory lending issues that we covered last week. As reported below, Citigroup is claiming that it is not a successor to Associates First Capital Corporation, contrary to assurances Citigroup gave to community organizations and regulators in the Fall of 2000. But we'll begin with detailed issues about CitiFinancial, the subprime lending business that Citigroup (and Travelers before it) owned well before they acquired Associates.

In 2001, Inner City Press looked closely at CitiFinancial's practices in South Carolina, including the forgery of documents, the flipping of loans, and, perhaps most outrageously, CitiFinancial's gagging of its employees. See, e.g, "Citigroup Hires Prominent Lawyer in Loan Abuse Case," Reuters, July 27, 2001; "Citi Corroborates Two Allegations," American Banker, July 30, 2001).

Now, in February 2002, we are looking at CitiFinancial in Tennessee. Informed sources and documents paint the following picture, which we will sketch with the specificity of particular loans.

In a CitiFinancial Tennessee East District Memorandum, district manager Jim Chakales writes: "We want every customer offered a cure that our company offers, R[efinance] B[alance] O[nly], Upsell, Better secure our loan, Deferment, AOT. Not a statement in the note- like 'overloaded cannot pay,' the majority of our customers are in this position." Emphasis added.

Here, a CitiFinancial District Manager admits that a "majority" of CitiFinancial's customers are "overloaded" and cannot pay the loans they are being given. This admission is in writing; orally, Division Manager Wendell Miller told employees in August 2000 that most CitiFinancial customers "don't have the income to pay us back." The goal, apparently, is to get customers on the hook with one loan, often not real estate secured, and then to refinance that loan as a mortgage, with their homes as security. Unencumbered home, where the flipped loan is worth far less than the value of the house, are particularly targeted.

Caroline Wilson and her mother Loretta Bryant applied for a $66,000 mortgage from CitiFinancial's office on Clinton Highway in Knoxville. They were told that no loan would be issued without them also taking out credit insurance. Due to the insurance packed in to the loan, after twelve on-time payment, their pay-off amount grew to $72,000. This loan was written by CitiFinancial's May Maughan. CitiFinancial's Nancy Neel, and district manager Jim Chakales, were both told of this, as was CitiFinancial's 1-800 customer service number. But nothing was done.

Another CitiFinancial customer, Robert Nothstein of Bulls Gap, Tennessee, had $14,000 of insurance packed in to a $33,000 loan. He was told that he had to take the insurance in order to get the loan. CitiFinancial's Nancy Neel was told of this, and yet nothing was done.

A customer of CitiFinancial's West Knoxville office, Carla Littlefield, had $14,000 of insurance packed in to a $42,000 loan. When she sought to cancel the insurance, she was first told that it was not possible. Then, after she persisted, she was given a handwritten receipt. Only after further complaints was she given a computer print-out proving that the insurance was cancelled.

At CitiFinancial's Oak Ridge office, customer Wilma Johnson applied when she was 65 years old. But CitiFinancial filled out her insurance forms stating that she was 61. The branch manager was Ms. Lou Roberts. Complaints were made, but American Health & Life never investigated; nor did Citigroup.

At CitiFinancial's West Knoxville office, branch manager Robert Knight arranged of a friend of his to sell a pick-up truck to CitiFinancial borrower Donnie Davis. The truck quickly broke down, but the (CitiFinancial) loan is still due. The transactions involve using a CitiFinancial personal loan to pay off another CitiFinancial loan -- a major no-no. District Manager Nancy Neel is fully informed, but is beating the drum for full payment, now.

Customer Loretta Jones and her husband applied for a loan through a CitiFinancial office in Knoxville. Mr. Jones was and is being treated for a heart condition. Nevertheless, CitiFinancial's Ms. Freda Monday packed insurance into the loan. The insurance form requires an answer regarding pre-existing health conditions. The Jones' were told to leave this blank, and were charged for insurance, rolled into the loan. When they sought a copy of the final version of their documents, they found that CitiFinancial had subsequently checked the box, "no heart condition," and sent the form to American Health & Life. Inquiries were made, but no actions were taken.

In fact, Ms. Freda Monday was four times written up for insurance packing -- and yet she continues in CitiFinancial's employ. Employees recount that Ms. Monday has often and openly made comments reflecting racial animus in the office. On Martin Luther King Day, Ms. Monday reported stated that Rev. King only came to "rile the black up." When mixed-race couple applied for a loan, Ms. Monday opening commented, "Look at her, a white woman, and she can't do better than a black man." Ms. Monday's District Manager is Jim Chakales, who, according to employees, apologized to them in the Fall of 2000 for having directed them to violate consumer protection laws. Mr. Chakales' regional manager during the time frame was Bill Davis. The division manager, based out of Atlanta, was Wendell R. Miller.

These practices are systemic, and systematized, at CitiFinancial nationwide. In CitiFinancial's "Maestro" computer system, there is a so-called "Upsell Challenge List," of CitiFinancial personal loan customers who should be solicited to take out mortgages, often in the form of so-called "Equity Plus" loans, the blended interest rates on which are kept a half percentage point below the triggers of the Home Ownership and Equity Protection Act, HOEPA. Disclosure forms, under RESPA and otherwise, that are required to be signed by borrowers are often forged and back-dated.

These offices are not ones that Citigroup acquired along with Associates First Capital Corporation -- they were Commercial Credit offices, owned by Travelers; since Travelers acquired Citicorp, they have been CitiFinancial offices. Complaints about forgery on insurance documents, about illegal insurance packing, etc., have been directed to district managers, regional managers, and the so-called "home office," via it's 1-800 toll free complaint number. And yet nothing has happened; nothing has changed or improved.

The irregularities extend to efforts to artificially under-report delinquencies on loans. For example, a CitiFinancial employee named Jack Lay was found to be using his own money to make partial payment in order to advance customers' due dates and thereby conceal delinquencies; more systematically, loans are deemed non-delinquent due to a so-called "tornado deferment," regardless of the weather.

Now, ex-CitiFinancial employee Roy Cook has filed suit, alleging that he was ordered to violate consumer protection laws, and to under-report delinquency data. Mr. Cook analogizes CitiFinancial's practice to those of Enron. CitiFinancial has responded with various attacks on Mr. Cook. ICP's interest is in the underlying facts, of CitiFinancial's practices. Readers of this CitiWatch will remember that, following ICP's reporting of practices at CitiFinancial in South Carolina, complaining employees were threatened with litigation under gag orders they'd been required to sign. Once ICP reported this, CitiFinancial offered certain (other) employees money to keep quiet. Citigroup faxed ICP a letter, cynically requesting that ICP forward all future complaints to them. ICP responded that it would do so if Citigroup voided the gag orders, and actually took remedial action on the complaints. Then, manager Tim de la Paz was fired, as Citigroup tersely confirmed in response to media inquiries. See, e.g, "Citi Corroborates Two Allegations," American Banker, July 30, 2001. What will happen this time? Developing...

In other Citigroup news, the OCC last month quietly upgraded the CRA rating of Associates National Bank (Delaware) from Needs to Improve to Satisfactory. The OCC's performance evaluation recites that comment about the bank were considered, including the ANB's needs to improve CRA rating should preclude Citigroup from making further acquisitions. The OCC's exam states that "[t]his issue is now mute [sic] because the bank has a 'Satisfactory' rating as of the present examination." Yeah, "mute" (and not moot) is the word... The OCC Exam also dismisses the previous DOJ race discrimination litigation against ANB, noting that "the legal suit was settled."

Relatedly, Citigroup has filed its Answer to the FTC's predatory lending case. Significantly, Citigroup's Answer, at 4, states that "Defendants deny that Citigroup assumed the rights and obligations of Associates First Capital Corporation. Defendants deny that it is merging the domestic consumer finance business of Associates First Capital into the consumer finance business of CitiFinancial... Defendants deny that Citigroup and CitiFinancial are successor corporations to The Associates and deny that they are liable for the alleged conduct of The Associates."

For those keeping score, you will remember that when Citigroup applied to acquire Associates, Citigroup officials met with community groups and assured them that wronged Associates borrowers would be made whole. The claim that Associates in not being -- has not already been -- merged into CitiFinancial is also ludicrous. It also directly contradicts what Citigroup told community organizations and its regulators in the Fall of 2000....

Update of February 4, 2002: In 2000, over extensive community objections, Citigroup acquired the large subprime lender Associates First Capital (click "http://www.innercitypress.org/citiafcc.html" for a review). In 2001, Inner City Press / Community on the Move and other organizations challenged Citigroup's acquisition of European American Bank, "http://www.innercitypress.org/citieab.html" that Citigroup had become the largest predatory lender in the United States. The Federal Reserve approved Citi - EAB in mid-2001, but stated that it would conduct an on-site examination of CitiFinancial. To date, no results of that examination have been disclosed. Now, from this week's mail bag:

Subj: CitiFinancial
Date: 1/28/02 10:51:22 PM Eastern Standard Time
From: [Name withheld] -- Greenwood, South Carolina
To: CitiWatch [at] innercitypress.org

...I have a case against CitiFinancial where they did everything to me that is in the FTC's summons. Although mine is just a little bit worse than some of the things mentioned in their summons. I am now losing my home because I could not pay a mortgage payment of $1300.00 per month (you wouldn't believe the insurance, points and fees, etc. that was added). The payoff on my $76,000.00 home is now $120,000!

I love your site and check it daily! I must now do a little research on the new post regarding the "Supplemental Scheduling Conference."

And:

Subj: class action suit?
Date: 1/30/02 10:08:04 PM Eastern Standard Time
From: [Name withheld]
To: CitiWatch [at] innercitypress.org

We are in the process of losing our home to foreclosure. A home that was originally financed through Associates Financial, bought out by Citigroup, then we began receiving things in the mail that read "Travelers" Mortgage, which we had never heard of. We were unable to save our home although we had borrowed the money to make it current. We were in financial difficulty when we where approached by a Associates loan officer while paying a loan we had with them. We said yes we would refinance , we thought we had no choice. The interest rate was 14 1/2 %...

What a company...

Update of January 28, 2002: Citigroup last week celebrated its 100 years in Asia. It issued press releases in various country. In Japan, Joyce Phillips, Citi's "Country Business Manager" told reporters that Citi is "working on... expanding physical locations and relocating existing locations." She states that Citibank has a total of 29 locations across Japan, including 23 for consumer banking, four for private-banking and two for corporate banking. No mention was made of Citi's high interest rate lender, acquired along with Associates First Capital (see below for update on FTC's lawsuit against Citi).

In Hong Kong Citi announced that the Chinese name of Citibank in Hong Kong and Singapore will change from "Wan Guo Bao Tong" to "Hua Qi" to create a single Chinese branding around the world. Citibank first opened branches in Asia in 1902 in Hong Kong, the Chinese mainland, the Philippines, Singapore, Japan and India through its predecessor, the International Banking Corporation.

Meanwhile, Citigroup is reportedly interested in acquiring Thailand's Bank of Asia, majority owned by ABN Amro. The Bangkok Post reported that ABN Amro officials in Amsterdam did not rule out a sale. ABN Amro, which bought 75 pct in Bank of Asia for 7.5 bln baht in 1998, announced last year it would exit several markets to focus on the Netherlands, the US and Brazil...

For those interested, Citi's Sandy Weill will be presenting on Jan. 29 at the Salomon Smith Barney Financial Services Conference, at 12:15 p.m....

Here's another update on the Federal Trade Commission's predatory lending lawsuit against Citigroup. Citi's motion to dismiss was denied on December 27, 2001. On January 9, a scheduling conference was held before Judge Jack Camp, where he ruled that the discovery phase will end by September 9, 2002. Citi has since filed its own "Proposed Supplemental Scheduling Order." What will come out in discovery, particularly as to pre-Associates CitiFinancial, just be interesting...

Here's a report from the field:

Subj: (no subject)
Date: 1/27/02 10:48:31 PM Eastern Standard Time
From: [Withheld for the time being]
To: CitiWatch [at] innercitypress.org

If anyone there is interested in info on a lawsuit where a CitiFinancial employee is suing Citi for retaliatory discharge:... I was fired last year for refusing to violate Fair Debt and Collection Act; Consumer Protection laws and Security and Exchange Commission violations (a/k/a distorting delinquency and charge-offs)... I may as well go public. I have insurance tracking reports and other documents... I worked in New Jersey also and I now feel the only reason things were different up there was because the state regulates everything whereas down here in Tennessee nothing is regulated. I have even caught incidents of forgery and insurance fraud and when Citi found out they do nothing. One of my customers even contacted the insurance company and they said there was nothing they could do. We even called corporate HQ and upper management and still they don't care... The employees who did the forgery and fraud have been caught before but have never been disciplined. I know because I caught some of them before I was fired and when I tried to do something I was fired.

To be continued...

Update of January 22, 2002: The centrality of high-interest rate subprime lending to Citigroup was confirmed last week, when CEO Sandy Weill named as president and presumed successor Robert Willumstad, the head of CitiFinancial (and of Commercial Credit before that). "In selecting Mr Willumstad, Mr Weill cited his work in integrating Associates First Capital, the sub-prime home equity lender Citigroup bought in 2000." FT, 1/16/02. Meanwhile, an update: in response to ICP's December 7, 2001 comment to the FDIC on Citigroup's two applications to shift non-insured overseas deposits to Citibank FSB, the FDIC wrote ICP on January 15 stating that "the FDIC has decided not to grant your request for a hearing... We feel that the material you have forwarded to this office will allow the FDIC to perform a thorough review and in-depth analysis to address your concerns." That would seem to imply that the FDIC has not (yet?) approved Citigroup's application, which Citigroup wanted approval for by January 6, 2002. Then again, with the FDIC, one never knows.

In Seoul, South Korea on Jan. 14, Hong Suk-joo of Chohung Bank announced that Citigroup is interested in taking over Chohung's credit card operations. Chohung Bank was nationalized and recapitalized with state funds following the 1997-98 Asian financial crisis. According to Reuters, Chohung has benefited from slew of incentives including tax breaks. Citigroup, just after 9/11/01, pulled out of talks on buying Korea Exchange Bank's credit card unit....

At deadline, Citigroup announced it's buying the Mexican insurance and pensiuon fund unit of Aegon for $1.24 billion, through "http://www.innercitypress.org/citimex.html"...

Update of January 14, 2002: At deadline, we've learned that in the Federal Trade Commission's predatory lending lawsuit against Citigroup, Judge Jack T. Camp has denied Citigroup's motion to dismiss, and has granted the FTC's motion to begin the discovery process. We'll have more on this next week. There's a lot... to discover.

For those who may have wondered what Citigroup was buying when it hired Robert Rubin just after he stepped down as Treasury Secretary, the Washington Post of January 12 reports that last Fall, Rubin called Peter Fisher, Treasury undersecretary for domestic finance, and asked "what he thought of the idea" of calling bond-rating agencies to help forestall a crippling reduction in Enron's credit rating, according to a statement released by the Treasury Department. Could it be that Rubin's policy speeches, including on the Community Reinvestment Act, are just a front, for old-fashioned influence peddling?

On January 7, Citigroup's Banamex announced that it has agreed to sell its controlling 59.58 percent state in Argentina's Banco Bansud. "http://www.innercitypress.org/citimex.html" said it signed a contract with Argentina's Banco Macro SA on Dec. 19; no further details were given.

On January 10, Citigroup announced in an SEC filing that it has reduced its stake in the chewing-gum maker Wrigley from 6.2% to 4.9%. And who knew that chewing gum was related to financial services?

There might be something to be said for Citigroup improving its banking business before trying to chew gum at the same time. IDD of Jan. 7 reports that when Citigroup acquired "http://www.innercitypress.org/citieab.html" branches last year, some customers in the two banks ended up with identical account numbers. A customer who discovered that money was missing is Bonnie Graham. "The supervisor said that when Citibank acquired EAB and integrated the accounts on Sept. 4, 2001, some of the EAB accounts had the same account numbers as the Citibank accounts," said Graham, "and so the particular withdrawal made to my account was by an EAB customer with the same account number, and whom I have never met...When I asked the supervisor what would have happened if I didn't catch the error, she said that they probably would not have found it on their own." Great...

The Citigroup - EPA conflicts continue to be exposed. Even the Washington Times (1/11) reports on EPA Ombudsman Robert J. Martin's lawsuit asking for a temporary restraining order in the U.S. District Court for the District of Columbia to protect his files to allow completion of the investigation of the Shattuck Superfund site in Colorado and the Marjol Battery cleanup in Pennsylvania. The legal director for the Government Accountability Project said, "the interests of Mrs. Whitman's husband have defeated the public interest, to the extent of condemning Denver, Colorado, and Shroop, Pennsylvania, citizens to centuries of toxic poisons in their city's back yard." John Whitman is the managing partner of a venture capital firm controlled by Citicorp, a subsidiary of Citigroup. Additionally, Citigroup stocks valued between $100,000 and $250,000 are listed in Mrs. Whitman's financial disclosure statement. Citigroup is responsible for the original botched cleanup of the Colorado site and will pay only one-fifth of the $35 million cost. A Citigroup financial partner also is responsible for the cleanup at a waste site in Pennsylvania containing lead contamination. According to GAP, one of the largest insurance companies handling medical claims for workers and residents at ground zero is Travelers Insurance, also owned by Citigroup. When Mrs. Whitman was governor of New Jersey, the state awarded a $1.6 million grant to an Internet company, Mail.com, which Mr. Whitman directed, according the Star-Ledger newspaper in Newark....

Update of January 7, 2002: Last week Citigroup's Deryck Maughan was named a knight of the British Empire by Queen Elizabeth II. Various media accounts noted that Mr. Maughan "is believed to be a possible successor to Sanford Weill, Citi's chairman and chief executive." Citigroup quickly fired back: "Sandy plans to continue running this company for the next several years. He has also indicated that when the time comes his successor will come from the top ranks of the company."

Meanwhile, at a holiday party in Brooklyn attended by too many Citigroupies to count, ol' Sandy was repeatedly referred to as "Sandy Vile" -- that's with a "V," as in villainous. This moniker, widely used within Citigroup, has not yet appeared in Citigroup's promotional materials. Nor does Citigroup's continuing environmental woes. In Colorado, the Denver Post of Jan. 2 editorialized that "[t]he proposed Shattuck settlement lets the property owner, a Citigroup unit, off the hook too lightly... The public has until mid-January to comment on the settlement... If enriched uranium or other highly radioactive materials are found at the site, the settlement says Shattuck will pay more of the clean-up's costs... These provisions must be iron-clad; taxpayers must not suffer if Shattuck was wrong about what's at the site." Citigroup lobbies; Citigroup's too-big-too-fail.

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