Bloomberg’s Bob Ivry has a great piece out on mortgage whistleblower Sherry Hunt, who just won a false claims suit against Citigroup.
By 2006, the bank was buying mortgages from outside lenders with doctored tax forms, phony appraisals and missing signatures, she says. It was Hunt’s job to identify these defects, and she did, in regular reports to her bosses.
Executives buried her findings, Hunt says, before, during and after the financial crisis, and even into 2012.
In March 2011, more than two years after Citigroup took $45 billion in bailouts from the U.S. government and billions more from the Federal Reserve — more in total than any other U.S. bank — Jeffery Polkinghorne, an O’Fallon executive in charge of loan quality, asked Hunt and a colleague to stay in a conference room after a meeting.
The encounter with Polkinghorne was brief and tense, Hunt says. The number of loans classified as defective would have to fall, he told them, or it would be “your asses on the line.”
Citigroup behaving badly as late as 2012 shows how a big bank hasn’t yet absorbed the lessons of the credit crisis despite billions of dollars in bailouts, says Neil Barofsky, former special inspector general of the Troubled Asset Relief Program.
“This case demonstrates that the notion that the bailed-out banks have somehow found God and have reformed their ways in the aftermath of the financial crisis is pure myth,” he says.
The HUD Inspector General reports unsealed after the settlement show that robosigning was still going on as late as this year. It’s just not a surprise that Citigroup was covering up fraud in their mortgage unit as late as this year.
After all, why shouldn’t Citigroup do so? It worked out for their executives last time, didn’t it?