Pension adviser goes after Citigroup (C) board

Posted Jan 16th 2008 8:20AM by Douglas McIntyre
Filed under: Management, Law, Citigroup Inc. (C)

In what may be the newest wrinkle in troubles for money-losing financial firms, boards may be singled out for poor oversight. Union pension adviser CtW Investment Group is going after Citigroup (NYSE: C), declaring "Accountability for risk management begins with the Audit Committee, and they will be the first to face an opposition shareholder vote," according to Reuters. The group may fight the re-election of some directors at the bank's next annual meeting.

The point may be well taken. A look that the charter for the audit committee at Citi shows that it does say the group is responsible for overseeing risk management activity by the bank's management. The question becomes to what extent does that entail digging into the bank's balance sheet and specific investment decisions. The audit committee almost certainly could have done more to question the company's move into subprime instruments but may have felt that such a move would be too intrusive.

The next question will be if any members of the board are liable for their actions. The group may defend itself by interpreting the issue of looking at risk decisions in very broad terms. But Citi's subprime mess did turn out to be a very broad problem.

Douglas A. McIntyre is an editor at 247wallst.com.

Tags: board, C, Citigroup, CtW Investment, CtwInvestment, oversight

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Reader Comments (Page 1 of 1)

1-16-2008 @ 4:47PM

Americas Watchdog said...

We have the National Mortgage Complaint Center & the Corporate Whistleblower Center & we don't think Citi will be the only one pension funds go after. We think by election time most US pension funds will be lined up in front of Congress asking for a bail out. Congress does not have the money & many of the big lenders can not write buy back provisions checks much longer. So we think the pension funds will eat it.

We don't think anyone is talking about it yet..........but we think Pension Fund Valuations will be the big torpedo that hits the dike holding up the economy. Pension funds bought MBS's from Investment bankers or the lenders without really looking at what they were buying. We don't think they understood the risks of pay option ARM's, nor do we think they understood how over inflated values actually were. If the pension paid a buck for a MBS, its now worth about .80 cents on the dollar.

While Ben can lower rates to zero, it will not restore values that were never real to start with. Ben has a second problem............everytime he lowers the rate...........our dollar is worth less (Infation). But inflation will not restore the real estate prices because there are supply issues.

Conclusion We are in a very, very big mess.