Break up Citigroup and prosecute CEO Vikram Pandit for not disclosing on the bank’s 2008 10-K that the bank had recently received eight-page memo from the Office of the Controller of the Currency laying out in detail the weaknesses and deficiencies in the its risk management?
Mike Mayo in his new book, “Exile on Wall Street,” writes that as the new CEO at Citi, Pandit could have come clean and admitted the bank’s problems.
“But he didn’t. Instead, on February 22, 2008, just eight days after receiving the letter, Pandit signed off on Citi’s 10-K, its annual statement for the prior year, including a statement saying that the company’s internal controls were fine. Pandit knew that, by the standards of a neutral third party, the internal controls were flawed, yet he didn’t disclose it. At best he didn’t know what was going on and signed off anyway; at worst he committed a lie of omission…Pandit’s action in signing the 10-K may have been more than simply dishonest — I believe it was flat-out illegal under the Sarbanes-Oxley Act.”
Pandit’s actions didn’t become public until early 2011 when the Financial Crisis Inquiry Commission released some of its reporting, added Mayo. Citi, he adds, mounted a hyper-technical defense saying the OCC never uttered the key phrase “material weakness.”
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