The financial sector on either side of the Atlantic has been in the dock recently over a number of scandals that, had they happened in any other realm of business, would usually land the perpetrators in jail. The worst example of this was the UK Libor scandal where the behaviour of Barclay’s Bank has been the focus of attention, but other examples have included banks such as HSBC being fairly complicit in money laundering (inadequate checks and balances) and others being party to UN sanctions busting by facilitating Iranian business interests. The sanctions in question were imposed in an attempt to stop Iran from acquiring weapons of mass destruction, so it is not a trivial issue.
The most recent chapter of dubious practice involves US banking giant Citigroup who have settled an action brought by shareholders who were arguing that Citigroup had hidden the extent of its subprime exposure. Citigroup has paid shareholders $590 million whilst maintaining that it was innocent of the allegations – the justification was that they decided to settle in order to “avoid further legal charges”. Barclay’s it will be recalled, had manipulated Libor in order not to let on that it was in any difficulty in obtaining funds; thereby protecting its own share value.
Citigroup were the subject of a class action by shareholders alleging that the bank had concealed the extent of its exposure to the subprime crisis in 2008 through a series of misstatements and omissions. The bank’s losses during the global financial crisis were estimated at the $27.7 billion mark and its share value is currently only about a tenth of its pre-crisis level.
Citigroup joins bank of America and Wells Fargo who paid $601.5 and $590 million respectively to settle similar claims – obviously defending your impeccable behaviour before a court of law must be prohibitively expensive in the USA.