Sunday, October 30, 2011

To BEQ authors re Citigroup mortgage fraud settlement

To: [Business Ethics Quarterly authors per here]
Sent: 10/28/2011 9:19:20 A.M. Central Daylight Time
Subj: To BEQ authors: re Citigroup mortgage fraud settlement

Dear Professors,
This October 20 Wall Street Journal article on the Citigroup mortgage fraud settlement for $285 million against Citigroup also reports that the SEC has negligence civil charges against a Citigroup employee that it is pursuing. The lawyer for the Citigroup employee is quoted as saying, "He was not responsible for any alleged wrongdoing, he did not control or trade the position, did not prepare the disclosures and did not select the assets," and, "We will vigorously defend this lawsuit."
Here are some arguably compelling questions for business ethicists:
1. If there is wrongdoing for which Citigroup is called on to pay $285 million, shouldn't officers and employees who are responsible for the wrongdoing be held liable to some extent?
2. If responsible officers and employees are not held liable to some extent, is that not a signal to all officers and employees, "Go ahead, put your thinking caps on, and come up with your next idea for making the company money, don't worry too much about whether it is ethical or not, ideally the company will make some good money from it and be able to pay you additional compensation for the year, and no one will be the wiser, of, if your idea does come a cropper and a liability has to be paid, it will come out of the hides of the stockholders and not you, so again don't worry"?
3. If there is wrongdoing by Citigroup, are there legitimate reasons why responsible officers and employees should not be held personally liable?
4. Is it possible that the legal system works so badly that there is fact no wrongdoing but a $285 million payment still gets extracted from Citigroup? If so, and there is no wrongdoing, can that have any adverse effect on attitudes and efforts related to Citigroup and its officers and employees being more ethical?
5. Will a meaningful determination be in fact made of wrongdoing, or not, in this matter, which will provide guidance to other officers and employees of Citigroup and of other banks and corporations, relative to future decisions and actions of such officers and employees?
Rob Shattuck

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