On February 14, 2008, John Lyons, the examiner in charge of large bank supervision at the OCC, sent Citigroup (NYSE:C) and its auditors a scorcher of a valentine. In a nutshell, it said that Citigroup had no idea what it owned and had no idea how to value it. “Risk management had insufficient authority,” it said, the board “had no effective oversight role,” and “matters requiring attention” ranged from corporate governance and risk management in general and CDO valuation in particular.
Eight days later, on February 22, Citi unveiled its annual report to shareholders. In that report, Vikram Pandit personally attested that Citi had full control over its finances and that its valuations were reliable; the auditor, KPMG, said exactly the same thing.
The FCIC should have asked questions about this — after all, the OCC letter comes from its own archives. But it doesn’t seem to have done so, which means that it has fallen to Jonathan Weil to do the digging and to construct a timeline and to ask awkward questions. The problem is that Weil, as excellent as he is, doesn’t have nearly the power that the FCIC had. So he can get stonewalled easily:
"Pandit, Crittenden and O’Mara didn’t return phone calls. A KPMG spokesman, George Ledwith, declined to comment, as did an OCC spokesman, Kevin Mukri. A Citigroup spokeswoman, Shannon Bell, declined to discuss the OCC’s findings."
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