Ex-Citigroup banker's fraud case goes to the jury

[Eugene]

Source: Reuters

Ex-Citigroup banker's fraud case goes to the jury

By Grant McCool
NEW YORK | Mon Jul 30, 2012 2:55pm EDT

(Reuters) - A jury was asked on Monday to decide whether one of the few individuals charged over the collapse of subprime mortgage investments intentionally misled investors in a $1 billion Citigroup Inc deal or had been singled out to take the blame for losses.

Brian Stoker, a former manager on Citigroup's mortgage investments desk, could be barred from the financial industry and ordered to pay fines if convicted on two civil counts of securities fraud. His trial in U.S. District Court in Manhattan began two weeks ago.

The U.S. Securities and Exchange Commission contends that Stoker failed to tell buyers that the bank selected some of the assets for a mortgage pool known as a collateralized debt obligation and made a $500 million "short" bet that it would fail.

The transaction caused more than $700 million in investor losses, the SEC said.

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Read more: http://www.reuters.com/article/2012/07/30/us-citigroup-stoker-idUSBRE86T15P20120730

[1StrongBlackMan]

1. I'm pretty certain ...

that a judgment against this one guy, Stoker, will result in:

1) negligent (supervision) civil suits against Citigroup; and,

2) open the flood gates on similar suits against other banks, as it'll show the suits can be brought and won.

[Egalitarian Thug]

2. I like your spirit. n/t

[1StrongBlackMan]

3. Spirit, Nope ...

Just understand that judgments of this type ripple.

Regarding my first suspicion:

The defrauded Marks, erm ... investors will want to recover their loses. Stoker does not have pockets deep enough to approach making them whole; but citigroup does. This is exactly what negligent (supervision) suits are all about ... recovering from the deep pocket.

And, judgments like this are difficult to defend, as they would have to argue that they knew that he was shorting the product, i.e., admit that they were a party to the fraud that has already been determined; or, argue that they didn't know of the banker's activity, despite internal e-mails showing everyone knew the company was shorting, i.e., admitting that they did not sufficiently manage their employee.

The banks would likely settle with the investors because who would believe that a banker could sell all this product, that internal e-mails show everyone knew the company was shorting, without the knowledge/consent of the company's management?

Regarding the second suspicion:

Contrary to LA Law, Harry and Suits, no lawyer/law firm wants to be the first to bring a suit that no one thought could/would be brought, let alone, won. This opens that door, gives them a map on what to argue, and where to file.

Damn, I wish my Bar license was active ... and I had any interest in, actually, practicing law again.