Former Citigroup Execs Charged With Fraud

The Associated Press reports that the SEC claims the two former executives were two of the Citigroup officials who were primarily responsible for the fraud alleged in a previous lawsuit the SEC brought against Citigroup Global Markets, Inc. and Smith Barney Fund Management LLC.   The charges were related to the creation and operation of an affiliated transfer agent that served the Smith Barney family of mutual funds.

The SEC claimed that the divisions, through the affiliated transfer agent, took most of the benefit of a substantial fee discount rather than passing the fee discount on to the funds.   That netted nearly $100 million in profit at the funds’ expense over five years, the AP reports.   Citigroup admitted no wrongdoing when it settled that suit for $208 million.

In the current suit, the SEC said that Jones“approved the final structure of the deal fully aware that the affiliated transfer agent was projected to make tens of millions of dollars in profit each year for doing minimal work.”

Jones’ attorneys, James Doty and G. Irvin Terrell, said the allegations are “unfounded and overreaching” and said he is a victim and not a perpetrator in the situation.

A lawyer for Daidone did not return a phone call from the AP for comment.