By Pam Martens and Russ Martens: August 5, 2015

Citigroup, the bank that played a central role in bringing America to its knees in 2008; received the largest taxpayer bailout in the history of finance to resuscitate its insolvent carcass; pleaded guilty to a felony count of rigging foreign currency trading in May and was put on a three year probation – is now under a string of criminal and civil investigations.

On August 3, Citigroup filed its quarterly report (10Q) with the Securities and Exchange Commission (SEC). Instead of reporting a pristine slate free of transgressions as one would expect from a felon on probation, Citigroup reported that it had settled allegations of money laundering with the Federal Deposit Insurance Corporation and the Commissioner of the California Department of Business Oversight involving its Banamex USA unit. The bank was, as typical, able to pay a penalty of $140 million and avoid an admission of guilt.

What Citigroup did not report on its 10Q is that it is also under another criminal money laundering probe by the Justice Department for its Mexican-based Banamex unit, according to a Bloomberg Business report. On July 24, Bloomberg reported the following:

“The U.S. Justice Department is investigating whether Citigroup Inc. let customers move illicit cash through its Mexico unit, setting the bank’s biggest international operation in the path of an expanding money-laundering probe.”

Publicly-traded companies are required to report material information to investors. Citigroup’s 10Q was filed on August 3 while the Bloomberg report was filed 10 days earlier, indicating that subpoenas had been issued to the company. Why Citigroup did not report the new investigation is unknown. Citigroup has a serial history of money laundering allegations, as Wall Street On Parade reported in 2013.

Also during the month of July, Citigroup reached a settlement with the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau (CFPB) over charges of bilking its credit card customers. The CFPB charged Citigroup’s commercial bank, Citibank, with a raft of illegal acts, including charging credit card customers for fraud and identity theft services that were never provided, and deceptive marketing practices to bilk customers out of illegal fees. The bank was ordered to return $700 million to 8.8 million customers and pay a penalty of $35 million.

A paltry penalty of $35 million dollars for ripping off 8.8 million customers for a felon bank on probation with a serial history of wrongdoing seems like a serious mismatch of punishment matching the crime.

Adding further to concerns that the four-year old CFPB, created under Dodd-Frank to stop these serial bank abuses of unsophisticated customers, is more lite-touch regulation, is the fact that as the CFPB was applying the wrist-slap of the $35 million penalty to Citigroup, which had $7.3 billion in profits last year, the CFPB was opening a new investigation into Citigroup’s abuse of student loans held by struggling college students. Citigroup reported the new investigation in its current 10Q.

In 2013, Wall Street On Parade took a hard look at Citigroup’s involvement in the student loan market. We reported the following:

“On February 27 of this year, the Consumer Financial Protection Bureau (CFPB) sought public comment on what borrowers were experiencing in the private student loan market. It received over 30,000 responses. Respondents who had taken out loans from Citibank painted the portrait of a cold-hearted, conniving miscreant.

“Allison L. from Rego Park, Florida wrote about her Citibank loans as follows: ‘I have made over $110-125K in the past 4 years with working overtime as a nurse. My base pay is $59,000. I cannot keep this pace any longer. I do not own a home, and it seems that I never will. I have paid my credit card and student loan debt on time for the past 13 years. I have paid $50,000 towards my student loans, but $25,000 has gone to interest. I will end up paying at least double on my student loan money by the time it is over. This was not clear to me when I had initially borrowed the money. Now my credit card interest rates are too high for me to be able to pay for food and gas. I am thinking about filing for bankruptcy, but of course my student loan debt is not dischargeable.’

“Allison is correct; under the bankruptcy reforms of 2005, there is limited ability to get out from under the crushing weight of student loan debt.

“Diane A. wrote the following to the CFPB about her Citibank loans: ‘I have been paying them $172 a month for almost 3 years for a $15,000 loan and I still have not gotten under the original $15,000 principal balance amount and I will not get there until the end of this year.’

“Erick A. wrote: ‘Citibank was comparable to the devil in every way.’

“Darlene L. put an even more personal face on the problem, writing: ‘…After 911, Citibank offered a forbearance to residents of NYC, which I (stupidly) took, if anything to build my savings just in case I lost my job, which I did two years later, just after Shock and Awe (business dropped because of it.) At this time, I took another forbearance.  And another during the crash of ’08, when I again lost income. I did this to keep my credit rating from falling, as it is difficult to obtain an apartment in NYC with any adverse mark whatsoever on your credit report. During this time Citibank sold my loan to Sallie Mae, who changed the terms. (Citibank allowed me to pay off the interest, if I had it. Sallie Mae does not.) Now I owe Sallie Mae about $45,000, even though I have already paid $35,000 on a loan that was at approx. $32,000 when I graduated in 1994. Last year, I took on another job to pay down my debt (which nearly resulted in a nervous breakdown — should a person be working literally ALL THE TIME?)…’

“Mary Dove of Brooklyn, New York strengthened the case further against Citibank: ‘My original balance (5 years ago) with Citibank was $35,642.00. I have paid in total $15,293.96. And, my current balance is $32,459.69. The fact that banks can charge this type of interest on Student Loans is completely unethical. We should have government policies that address the gouging the banks are doing to student.’

“On April 25 of last year [2012], Justin Kuehn, a law school graduate, filed a class action lawsuit against Citibank in Federal Court in Manhattan, also naming its former subsidiary, the Student Loan Corporation (SLC), and Discover Bank, the company to which it sold part of its student loan operations in 2010. Citibank continued to service the loans, even after they were sold to Discover. Kuehn told the court that in November 2007, he had consolidated four private student loans with SLC, then owned by Citibank. Subsequently, his complaint charged, the defendants ‘engaged in a scheme to collect additional interest at the expense of borrowers of student loans.’ He said the firms were ‘deceiving borrowers into believing that their monthly payments have been reduced because of an interest rate reduction, when in fact, the vast majority of the payment reduction is attributable to a reduction in the amount of principal being repaid each month.’ That resulted, according to Kuehn, in thousands of dollars of additional interest being paid by student loan borrowers.

“After consolidating his loans, Kuehn started out with a balance of $99,148.19 with an annual, fixed rate of interest of 9.55%. (Keep in mind that Citigroup was allowed to borrow from the Federal Reserve at a rate of less than 1 percent.) Around the first of January 2008, Kuehn began making monthly payments of $845.72 through an auto-debit program. In April and June of 2008, Kuehn paid down $15,000 of the principal on the loans; he paid an additional $10,000 in June 2009 for a total principal reduction of $25,000. Subsequent to those payments, Citibank and SLC continued to auto-debit the same $845.72 per month until January of 2012. At that time, says Kuehn, ‘Defendants unilaterally dropped Plaintiffs auto-debited monthly payment from $845.72 to $539.27… As a result of the reduction to the monthly payment, the amount of principal being repaid on the Consolidated Private Student Loan declined from $335.67 in December 2011 to $42.59 in January 2012, namely, a decline of $293.08 per month, while the amount of interest paid remained basically the same declining only from $510.05 in December 2011 to $496.68 in January 2012.’

“Kuehn’s lawyers provided a graph in the lawsuit, showing that under the rigged new system of so-called ‘lower’ monthly payments, Kuehn would end up being forced to make an additional 197 monthly payments on the loan and pay an additional $71,577.04 in interest.

“According to Kuehn in his lawsuit, none of the banks involved disclosed this illegal maneuver; he had to ferret out what was going on himself. But the worst was yet to come for this young law graduate. After filing in a U.S. Federal Court paid for by the U.S. taxpayer, where every citizen has a right to bring a claim for a small filing fee, Judge Denise Cote ruled on December 6 of last year [2012] in favor of Citibank, pushing Kuehn’s claim out of her courtroom and into a privately run arbitration system.”

Below is a broader look at Citigroup’s rap sheet, the mega bank our government saw fit to resuscitate from insolvency during 2008 through 2010.

Citigroup Rap Sheet (Just the Highlights, Not Comprehensive)

December 11, 2008: SEC forces Citigroup and UBS to buy back $30 billion in auction rate securities that were improperly sold to investors through misleading information.

July 29, 2010: SEC settles with Citigroup for $75 million over its misleading statements to investors that it had reduced its exposure to subprime mortgages to $13 billion when in fact the exposure was over $50 billion.

October 19, 2011: SEC agrees to settle with Citigroup for $285 million over claims it misled investors in a $1 billion financial product.  Citigroup had selected approximately half the assets and was betting they would decline in value.

February 9, 2012: Citigroup agrees to pay $2.2 billion as its portion of the nationwide settlement of bank foreclosure fraud.

August 29, 2012: Citigroup agrees to settle a class action lawsuit for $590 million over claims it withheld from shareholders’ knowledge that it had far greater exposure to subprime debt than it was reporting.

July 1, 2013: Citigroup agrees to pay Fannie Mae $968 million for selling it toxic mortgage loans.

September 25, 2013: Citigroup agrees to pay Freddie Mac $395 million to settle claims it sold it toxic mortgages.

December 4, 2013: Citigroup admits to participating in the Yen Libor financial derivatives cartel to the European Commission and accepts a fine of $95 million.

July 14, 2014: The U.S. Department of Justice announces a $7 billion settlement with Citigroup for selling toxic mortgages to investors. Attorney General Eric Holder called the bank’s conduct “egregious,” adding, “As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits.”

November 2014: Citigroup pays more than $1 billion to settle civil allegations with regulators that it manipulated foreign currency markets. Other global banks settled at the same time.

May 20, 2015: Citicorp, a unit of Citigroup becomes an admitted felon by pleading guilty to a felony charge in the matter of rigging foreign currency trading, paying a fine of $925 million to the Justice Department and $342 million to the Federal Reserve for a total of $1.267 billion.