So much for that business about Citi never sleeping.
The giant bank agreed Wednesday to pay $1.5 million to settle claims that it dozed off at the switch as one of its brokers allegedly joined his customers in a scheme to steal tens of millions of dollars from the dead.
The Financial Industry Regulatory Agency, the self-regulator known as Finra, said Citi agreed to pay a $750,000 fine and to repay $750,000 in commissions in the case of Mark Singer.
He is the former Citigroup broker who participated in a scheme that allegedly bilked $60 million from buyers of prepaid cemetery plots in Tennessee and Michigan over two years. In 2007, Coins2Day’s Roger Parloff outlined what he called the “story of what appears to have been a truly dastardly scam.”
A Tennessee criminal case against Singer ended this week in a mistrial, though he still faces criminal charges in Indiana.
He helped the customers by opening accounts, depositing funds, and making improper transfers to third parties, Finra said. His partners are facing various legal actions tied to the scheme as well, including one who pleaded guilty to charges in Michigan last year.
For its part, Citi didn’t admit or deny that it engaged in “supervisory violations” between 2004 and 2006, Finra said.
The watchdog said the bank “failed to reasonably supervise the handling of these accounts by inadequately responding to a succession of ‘red flags’ — failures that permitted the scheme to continue undetected until October 2006.”
Singer came to work at Citi in September 2004. Managers soon noted rapid fund movements in some of his accounts but “failed to conduct an adequate inquiry into the matter,” Finra said. In February 2005 the bank received information indicating one of the accounts in question had been opened using misrepresentations, but again “failed to conduct an adequate inquiry.”
Finally, in May 2006, the bank got a whistle-blower letter alleging extensive misconduct by Singer. You can imagine the vigorous response this engendered. “Despite the seriousness of these allegations, Citigroup failed to enhance supervision of Singer or restrict his activities,” Finra said.
It is too late to get the money back, but with any luck, prosecutors will soon succeed where Citi failed in restricting Singer’s activities.