Daily Archives: October 14, 2014

Citigroup to Disband Banamex’s Personal-Security Unit, Alleging Fraud

C +3.15% Citigroup Inc. C +3.15% said on Tuesday that it was disbanding the personal-security unit at its Mexican subsidiary Banamex, after finding what it described as “illegal conduct” and the use of “intercepted telecommunications.”

Citigroup placed a monetary value of the fraud at around $15 million.

Banamex security employees allegedly bought audio files of illegally intercepted phone calls, a person familiar with the matter said. They also moonlighted by providing unauthorized security services for people outside the bank. Recording conversations without the other party’s knowledge in Mexico is a federal crime.

The bank’s chief executive, Michael Corbat, said the conduct was appalling and that individuals would be held accountable. “We will continue to take whatever steps are necessary to make sure that every part of our global franchise lives up to our standards,” he said.

Read on.

Citigroup Mexican Unit Said to Have Committed Decade-Long Fraud

Citigroup Inc. (C) said it discovered that the private-security unit in its Mexican bank engaged in illegal and unauthorized activities that included working for people outside of the bank and using intercepted phone calls.

The fraud at Banamex, which began around 2000 and continued through last year, also included misreporting of gasoline expenses to inflate reimbursements from the bank, and shell companies were used to launder proceeds, said a person with knowledge of the matter, who asked not to be identified because the detailed results of a Citigroup internal investigation haven’t been disclosed. The fraud amounted to about $15 million, New York-based Citigroup said in a statement.

“While the fraud is not financially material, the conduct of the individuals involved is appalling,” Citigroup Chief Executive Officer Michael Corbat said in the statement. “Now that this investigation is complete, we intend to hold the individuals who conducted these activities accountable.”

Read on.


Ask anyone who’s ever tried to get a mortgage modification and they’ll tell you how tough it can be. The job is made even tougher when the bank refuses to acknowledge you as the rightful owner.

The problem is known as widow foreclosure, but this applies to children or anyone who might inherit a home following the death of a loved one. Those who inherit a home are not listed as the owner on the mortgage, and because of that, getting a bank to talk to you can be difficult.

“Oh, my goodness. My parents. They were married 40 years,” said American Canyon resident Lisa Booker.

Lisa has great memories of her mom and dad. Her parents moved to a home in American Canyon back in 2004 so they could be with their grandchildren. Lisa and her husband Deon needed help buying a house. So Lisa’s parents agreed to take out the mortgage in their names. Their intent after they died was to leave it for Lisa and her family.

“He was on the loan. We were on the title. We shared title,” Deon.

Lisa’s father Leon died shortly after moving in with them. Her mother Ella died a few years later. Lisa and Deon continued to pay the mortgage for several years after Ella passed away. But the value of the property dropped and their home was worth less than the remaining mortgage.

The Bookers asked Wells Fargo for a loan modification, but the bank refused to talk to them saying they were not the home owners because their names were not on the loan.

“Now the arrears were growing because they stopped accepting payments. So four, five, six months had gone by so now it’s a pretty big amount to pay right,” Deon said.

This is where the story gets murky which often happens in the mortgage cases. Wells Fargo says it told the Bookers they needed to assume the loan before the bank would negotiate with them. It blamed the Bookers for delaying the paperwork.

The Bookers said they gave Wells Fargo everything it asked for and submitted it again when the bank denied receiving it.

Lisa and Deon said they gave the bank the deed, the trust and the death certificates, but the bank still wouldn’t talk to them.

“It was as if we didn’t matter. As if family didn’t matter. As if you know, it was just a money game for them,” Lisa said.

Read on.

“We hope they were duped”: How prosecutors gave banks the best “penalty” ever

Defenders of Eric Holder’s legacy on financial crimes keep saying that, although we sent no bankers to jail for their tsunami of fraudulent behavior, at least we punished the parent companies in settlements, and forced them to compensate victims. I call it “settlement justice,” and it has become the template for how the perpetrators of white-collar crime get treated in America.

Usually, supporters of “settlement justice” tout the headline numbers ($37 billion!) and leave it at that. But it’s what happens after law enforcement signs the deal that matters. And one New Jersey lawyer’s detailed inquiry into a post-crisis settlement with Wells Fargo shows conclusively how banks wiggle out of their commitments, and why only prison cells can stop a Wall Street crime spree.

The story concerns the “Pick-a-Pay” loan program, one of the more toxic mortgage offerings during the housing bubble. These loans offered a variety of different initial payment options for borrowers to choose: a sum corresponding to a 15- or 30-year fixed rate loan, an interest-only payment, or a minimum payment that created “negative amortization,” where the principal balance would actually increase with each passing month.

Borrowers naturally trended toward choosing the lowest payment. But they were never told about the implications, and when the pay option expired, their monthly mortgage bill would skyrocket, usually leading to default.

These were not loans, but neutron bombs with a long fuse. And roughly half a million borrowers took these Pick-a-Pay loans under false pretenses from 2003-2008. Wachovia Bank and its subsidiaries sold the loans, but when Wells Fargo bought Wachovia at the end of 2008, they assumed responsibility for them.

Homeowners began to complain when the payments shot up, and law enforcement started investigating as well. Because Pick-a-Pay loans were designed to fail, and because Wachovia never disclosed the consequences, Wells Fargo was liable for violations of multiple consumer fraud statutes.

Read on.

Americans face post-foreclosure hell as wages garnished, assets seized

This is the new foreclosure nightmare for the homeowners that lost their home have to face…Any homeowner that live in a state (except for California) that has deficiency judgments should read this article.

NEW YORK (Reuters) – Many thousands of Americans who lost their homes in the housing bust, but have since begun to rebuild their finances, are suddenly facing a new foreclosure nightmare: debt collectors are chasing them down for the money they still owe by freezing their bank accounts, garnishing their wages and seizing their assets.

By now, banks have usually sold the houses. But the proceeds of those sales were often not enough to cover the amount of the loan, plus penalties, legal bills and fees. The two big government-controlled housing finance companies, Fannie Mae and Freddie Mac, as well as other mortgage players, are increasingly pressing borrowers to pay whatever they still owe on mortgages they defaulted on years ago.

Using a legal tool known as a “deficiency judgment,” lenders can ensure that borrowers are haunted by these zombie-like debts for years, and sometimes decades, to come. Before the housing bubble, banks often refrained from seeking deficiency judgments, which were seen as costly and an invitation for bad publicity. Some of the biggest banks still feel that way.

Read on.

We, the Sheeple Vs. The Banksters

Why is Preet Bharara, the ‘scourge of Wall Street’, taking a friendly tone towards mortgage bankers?

Ah, huh???

Here’s something you don’t expect to hear from a man who made his reputation by jailing bankers and becoming the “scourge of Wall Street”: ask him if fraud existed during the mortgage crisis and his answer is “the evidence is not there.”

The words come from Preet Bharara, the US attorney for the southern district of New York, who prosecuted more Wall Streeters for insider trading than anyone who came before him. Worth magazine this week named Bharara at the top of its “100 Most Powerful People in Finance”. Bharara seems to like his high profile, and appears to be gunning for an even bigger one: he suggested that the new US attorney general of the United States should share all of the priorities of Bharara’s own office.

In boasting about his record of putting white-collar criminals in jail, Bharara repeated a common – but outdated – Obama Administration line, that the mortgage crisis was not fuelled by fraud.

“This is by reputation and track record the most aggressive office in white-collar crime in the country ever,” Bharara modestly told Worth, “and if we’re not bringing a certain kind of case, it’s because the evidence is not there. Pure and simple”.

He added that critics pointing out his selective Wall Street targets merely “want to behead the heads of all these financial institutions”, without understanding how cases against them would not stand up in court.

This statement is, to say the least, a stretch.

For Bharara’s goals, however, it make sense. If he wants to start building a case that he should be attorney general in this administration, there’s no better way than to advertise himself as someone who doesn’t have too much prosecutorial ambition. This is an administration that, with Eric Holder at the helm of the Justice Department, hasn’t prosecuted these crimes in the last six years. Bharara would benefit from the idea that he would not rock the boat too greatly. It certainly would soothe some of the decision-makers in the White House, and their deep-pocketed friends on Wall Street.


The government understands law enforcement 101: just as in organized crime, prosecutors try to flip white collar crime’s lower-level grunts to try to get to the bosses above. They’ve belatedly started to do it with traders in the foreign exchange market-rigging scandal. But they never tried with the core mortgage frauds that drove the crisis; officials swiftly moved past investigations and right into settlement negotiations.

Then there are more creative options. The Sarbanes-Oxley law, put in place after the Enron/WorldCom/Tyco accounting scandals of 2001-02 – for which many executives went to jail, by the way – included a requirement for CEO certifications.

Every financial statement a corporation files with the Securities and Exchange Commission must come with a signed statement from the CEO, attesting that he or she has maintained and tested controls to ensure the company hasn’t taken large risks without disclosing them to investors.

These certifications get made annually, and knowing or wilful falsehoods on them can carry prison terms of up to 20 years. You could describe the entire financial crisis by saying that big banks took large risks without disclosing them to investors. Those multibillion-dollar write-downs didn’t come out of nowhere. Every bank CEO could therefore be legally responsible for failing to disclose improper risk management and a lack of control at their companies. Financial writer Yves Smith has explained this in detail before.

Instead, Bharara makes excuses.

Bharara justifies the inability to prosecute these cases because the CEO may have done “a really good job of getting a law firm to give them a legal opinion that blesses [their actions]”.

Read on.