Citi’s Vikram Pandit Faces FDIC Hot Seat

Citigroup CEO Vikram Pandit can’t seem to catch a break these days. And with good eason. For months, the bank and its leader have been embroiled in investor lawsuits connected to the marketing and sale of a group of proprietary Citigroup hedge funds sold under the brand names ASTA and MAT. Marketed to investors as safe fixed-income funds with losses not to exceed 5%, the hedge funds were later crucified by the credit crunch. Ultimately, the value of the funds fell dramatically - between 60% to 80% - and cost many investors their life savings.

Legal issues surrounding ASTA/MAT aren’t the only problems facing Pandit. Adding to his woes: $36 billion of net losses during the past six quarters.

More criticism was levied on Pandit last week courtesy of Sheila Bair, chairman of the Federal Deposit Insurance Corp. (FDIC). In a story appearing June 5 in the Wall Street Journal, it was reported that Bair’s office had been maneuvering to oust various members of Citigroup’s top executives. Specific individuals were not identified in the Wall Street Journal story, but Pandit’s name was rumored to be among those on Bair’s list.

Adding fuel to Citi’s management shake-up rumor mill is the apparent delay of a stock swap agreement between the U.S. Treasury Department and Citigroup. Announced three months ago, the deal entails converting $53 billion of Citigroup preferred stock into common shares, giving the U.S. government a 34% stake in the bank.

Another black mark occurred for Citigroup on June 1, which signaled the bank’s final day on as part of the Dow Jones Industrial Average. On Monday, June 8, Citigroup was replaced by The Travelers Companies.

Citigroup, which is the recipient of $45 billion in taxpayer funds under the federal government’s Troubled Asset Relief Program (TARP), has watched its stock deteriorate for more than a year now. Since mid-January, Citigroup shares have traded below $5. On June 8, the stock closed at a shocking low of $3.42; by comparison, the price was $20.48 at this same time last year.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

This entry was posted on Monday, June 8th, 2009 at 4:38 pmand is filed under Citigroup, Citigroup ASTA Fund MAT fund. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.