Outspoken bank analyst Michael Mayo turned up the heat on a long-simmering dustup between himself and Citigroup's top brass.
In a one-page research note yesterday, Mayo accused Citi CEO Vikram Pandit of breaking Wall Street securities law only months after taking the helm of the bank in early 2008.
Mayo's accusations center on recently unearthed records that show that the Office of the Comptroller of the Currency sent a letter to Citi on Feb. 14, 2008, informing the bank that the regulator harbored serious concerns about its internal risk controls.
Despite the letter, Pandit signed documents vouching for the integrity of the firm's internal controls and its public filings just days later.
According to Sarbanes-Oxley rules, both Pandit and Citi's chief financial officer at the time, Gary Crittenden, are required to sign off on Citi's publicly released financial records.
Merely eight months later, Citi accepted a $20 billion lifeline from Uncle Sam, which included a government agreement to guarantee $300 billion in dicey mortgage securities.
"The failure to highlight any disagreements or concerns on valuations and controls by Citi's primary regulator seems to us like a breach of Sarbanes-Oxley requirements to formally vouch for the company's financials," Mayo wrote.
In a statement Citi said its actions were "appropriate" at the time.
"Citi maintains rigorous disclosure controls and procedures to support its CEO and CFO certifications," said Citi spokeswoman Shannon Bell.
"These controls and procedures were followed in connection with the filing of the 10K in February 2008, and Citi's certifications were entirely appropriate," the spokeswoman added.
The three-year-old OCC report has come to light after the Financial Crisis Inquiry Commission recently released a 545-page report and reams of documents obtained as a part of its year-long investigation into the roots of the financial crisis.
Mayo told The Post that the new revelation raises questions about Citi's current risk management practices.
"We've got ongoing concerns about Citi's risk management," he said.
Is Pandit in jail?
Nope - he's getting a raise:
Four of Citigroup’s top executives will receive a total of nearly $12m in cash if the bank’s core operations earn a total of $12bn over the next two years, in a profit-sharing scheme that has raised eyebrows among some corporate governance experts.
John Havens, Citi’s second-in-command below the chief executive Vikram Pandit, stands to earn at least $5.2m, if Citi hits the profit target, while Manuel Medina-Mora, the head of the bank’s consumer unit and of its Latin America operations, could earn $2.7m. Alberto Verme, chief executive of Citi’s operations in Europe, the Middle East and Africa, is in line for a $2.3m pay-out while John Gerspach, the finance chief, could get $1.7m.
The payments will be tied to the performance of Citicorp, the group’s core operations, and exclude the earnings or losses recorded by Citi Holdings, the unit that houses non-core assets and businesses to be divested.
The awards are part of US banks’ drive to tie more of their executives’ compensation to long-term performance as regulators push Wall Street to reform its pay structures. The Citi executives will receive two-thirds of their awards in January 2013, with the rest payable a year later.
Silly, RBE, expecting accountability for a Master of the Universe.
Maybe if Pandit were a teacher...