Citigroup to pay $15.2 mln for misleading retirees
NEW YORK (Reuters) - Citigroup Inc. (C.N) will pay $15.2 million to settle charges its brokers induced hundreds of BellSouth Corp. workers to retire early and open accounts that cost them much of their nest eggs, the NASD said on Wednesday.
The penalty includes a $3 million fine and $12.2 million in restitution to more than 200 people through a related class-action lawsuit. The NASD also suspended three brokers and two branch managers at a Citigroup office in Charlotte, North Carolina, and fined them a total of $295,000.
According to the NASD, the largest U.S. bank failed to supervise brokers who conducted dozens of seminars for BellSouth workers in North Carolina and South Carolina from 1994 to 2002.
It said the brokers led workers to believe they could earn 12 percent a year on their investments, but did not properly explain the risks and disclose the fees.
More than 400 workers, typically unsophisticated investors in their mid-50s with less than $350,000 of retirement savings, opened in excess of 1,100 accounts.
"Given the ages of these folks, when they make mistakes, they don't have the time horizons to recover," said James Shorris, the NASD enforcement chief, in an interview. "That's what's tragic in this case. Many people had substantial retirement nest eggs, but some had to go back to work to recoup what they lost. What was promised as a dream ended up being a nightmare."
In an e-mail, Citigroup spokeswoman Susan Thomson said the largest U.S. bank takes the matter "very seriously," calling the activities "the inappropriate actions of a small group of employees in one office more than five years ago."
She said New York-based Citigroup is doing what it can to prevent a recurrence, and that the two lead brokers no longer work for the bank. Citigroup, the brokers and the branch managers did not admit wrongdoing.
The NASD last September warned investors to be wary of investment pitches that guarantee comfortable, early retirements, but don't warn of associated risks. Shorris said other investigations are ongoing.
AT&T Inc. (T.N) bought BellSouth in December.
DOW 21,000
The largest individual penalty went to Jeffrey Sweitzer, a broker who was fined $125,000 and suspended for 18 months.
Sweitzer, among other things, told clients he thought the Dow Jones industrial average .DJI might reach 20,000 to 21,000 by 2006; it peaked that year around 12,530, the NASD said.
Broker Matthew Muller was fined $50,000 and suspended nine months, and broker Joseph Zentner was fined $30,000 and suspended 30 days. Branch manager Randall Matz was fined $60,000 and suspended 90 days, and branch operations manager Elizabeth Harris was fined $30,000 and suspended 45 days.
Sweitzer and Muller no longer work at Citigroup, and Matz has been replaced, Thomson said. Continued...
