Ex-Citigroup VP pleads not guilty in fraud case
NEW YORK (Reuters) - A former Citigroup Inc vice president charged with embezzling $19 million from the bank's accounts -- an alleged fraud that went undiscovered for more than a year and a half -- pleaded not guilty in Brooklyn federal court on Monday.
Gary Foster, 35, was arrested Sunday at John F. Kennedy International Airport after arriving from Bangkok, prosecutors said. Foster's attorney, Isabelle Kirshner, said he had been in Bangkok for travel, and that he returned when his family told him a warrant had been issued for his arrest.
Foster, who appeared before Magistrate Judge Ramon Reyes in a blue buttoned shirt and khaki pants, was released on $800,000 bail, which was secured in part with his parents' house in Teaneck, New Jersey. The bail package forced Foster to surrender his passport and prohibits him from traveling outside of New York and New Jersey.
Prosecutors allege that between May 2009 and December 2010, Foster transferred $19.2 million from Citigroup debt-adjustment and interest-expense accounts to his own personal bank account at J.P. Morgan Chase NA.
Foster put fake contract and deal account numbers in the wire-transfer instructions to make them seem like they were supporting an existing contract, before diverting them first into the bank's cash accounts and then into his own accounts in as many as eight separate transfers, prosecutors said.
"The defendant allegedly used his knowledge of bank operations to commit the ultimate inside job," said Loretta Lynch, Attorney for the Eastern District of New York.
The alleged fraud went unnoticed until a recent internal audit of Citigroup's treasury department. A Citigroup investigator immediately informed the authorities, according to an affidavit from Thomas D'Amico, a special agent with the Federal Bureau of Investigation.
A representative for Citigroup said the bank was "outraged" by Foster's alleged actions.
"Citi informed law enforcement immediately upon discovery of the suspicious transactions and we are cooperating fully to ensure Mr. Foster is prosecuted to the full extent of the law," the bank said in a statement.
The $19 million is not a significant portion of the assets of a company the size of Citigroup, according to Sam Rosenfarb, a certified fraud examiner and public accountant with the New York accounting firm Marcum LLP.
Still, Rosenfarb said, it is unusual for so much money to have been stolen in such a short time, and for a single employee to be able to bypass the internal systems typical at a company like Citigroup, which require multiple individuals to sign off on large money transfers.
"I've never known an embezzlement of this magnitude," Rosenfarb said. "It's not a large amount of money in the scheme of payments, but for an embezzlement case, it's one of the largest I've ever seen."
Foster, who left Citigroup in January, faces up to 30 years in prison if convicted. According to his co-counsel, Brian Linder, he "is planning on fighting it."
No date has been set for the next hearing in the case.
(Reporting by Jessica Dye; editing by Gunna Dickson, Bernard Orr)
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