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SEC Charges Former Citi CFO

Gary Crittenden, the Citigroup CFO who steered the company through the financial crisis, is charged by the SEC with misleading investors.
Marie LeoneJuly 30, 2010

Former Citigroup CFO Gary Crittenden has been charged by the Securities and Exchange Commission with misleading investors about the bank’s exposure to subprime-mortgage-related assets. The claim against Crittenden was filed on Thursday, along with similar charges against Citigroup Inc. and Citi’s former head of investor relations, Arthur Tildesley Jr., who currently runs the bank’s cross-marketing group.

The SEC alleges that at a time when investors were “clamoring for details” about the bank’s exposure to subprime securities, Citi “repeatedly made misleading statements in earnings calls and public filings.” Specifically, between July and mid-October 2007, Citi said it had reduced its investment-banking unit’s exposure to subprime-mortgage-backed securities to $13 billion or less, when the actual exposure was closer to $50 billion, notes the SEC.

Without admitting or denying the SEC’s findings, Crittenden and Tildesley agreed to pay penalties of $100,000 and $80,000, respectively. Citi will pay a $75 million penalty.

The bank arrived at its lowball number by omitting two categories of subprime-backed assets from its disclosures: “super senior” tranches of collateralized debt obligations and “liquidity puts.” Citi disclosed the additional $40 billion worth of securities in those asset categories by November 2007, after the investments had lost their value. The SEC also claims that Crittenden and Tildesley “were repeatedly provided with information about the full extent of Citigroup’s subprime exposure.” In fact, the regulator alleges that Crittenden received a detailed briefing on valuation issues relating to the super senior tranches of CDOs in early September 2007.

Crittenden, who became Citi’s finance chief in March 2007, was one of the highest-paid CFOs in the country. In 2007 he received more than $19 million in total compensation, including an $11 million signing bonus. In 2008, the year Citi received $20 billion in government bailout money, Crittenden was paid $12 million in total compensation, according to Citi’s financial statements.

In March 2009, Crittenden was promoted to the newly created role of chairman of Citi Holdings. He resigned from the bank in July 2009, saying he wanted to devote more time to his family and other business interests. Before coming to Citi, Crittenden was executive vice president, CFO, and head of Global Network Services at American Express from 2000 to 2007. Prior to that, he was CFO of Monsanto and Sears, Roebuck.