You don’t have to be Everett Dirksen to wonder what the hell is going on at Citigroup:
Citigroup Inc. (C.N), the world’s largest financial services company, on Friday said it will pay $2 billion to Enron Corp. investors who accused it of helping engineer a massive accounting fraud at the energy trader.
The class-action settlement is one of the largest in corporate history, though it is less than the $2.58 billion that Citigroup agreed to pay WorldCom Inc. investors in 2004.
The settlement may put pressure on a series of other major banks to settle with Enron investors.
Skip to next paragraph Citigroup did not admit wrongdoing in agreeing to settle. It said the pre-tax payment is fully covered by its existing litigation reserves and that it does not plan to adjust its remaining reserves.
Could someone who knows more than me (I would ask my cat if he could talk) about corporate finance and corporate law explain a few things:
1.) When a company has to pay $4 billion in fines in a 2 year period, is it not a sign that something is horribly corrupt? Has anyone paid a price at Citigroup?
2.) How does a company have $4 billion in ‘existing litigation reserves?’ Why was that money not passed on to shareholders?
3.) What is the menatlity behind having $4 billion in ‘litigation reserves.’ Is this a legal requirement that you must have a certain amount of litigiation insurance or cash on hand in case you get sued, or is it just a tacit admission that we know we are engaging in some shady business, so let’s set aside some loot to mitigate the fall-out.
4.) Does anyone on the planet think that just because they did not admit guilt in the settlement, they are not guilty? If that is the case, and they are just tossing around cash, how do I get some?
And while these are snarky questions, I am actually really curious.