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 The decision, which followed Citigroup's $7-billion settlement in
2014 resolving federal and state civil claims related to mortgage
bonds, was described in a November report obtained by Reuters in
response to a Freedom of Information Act request.
Its release marked the first public acknowledgement by U.S.
authorities that executives at a major bank linked to the financial
crisis would face no criminal charges for their involvement in
selling billions of dollars of toxic mortgage bonds.
The report, by the Federal Housing Finance Agency's Office of
Inspector General, one of the agencies in the Citigroup probe, said
following the settlement, prosecutors reviewed the evidence to see
if any individuals could be charged and determined "there was not
enough compelling evidence."
Report on Citigroup: http://reut.rs/1TeOXQR
The investigation focused on the bank's practices related to its
sale and issuance of mortgage bonds from 2006 to 2007.
The two-page report, which summarized the investigation and called
the probe closed, does not name any individuals that were
investigated, nor does it elaborate on why individuals could not be
successfully prosecuted.
Patrick Rodenbush, a U.S. Justice Department spokesman, in a
statement noted the department in September announced a new policy
that "emphasizes the priority in any corporate case of holding
individual wrongdoers accountable."
He declined to say, though, if individuals at any other banks
investigated for practices related to mortgage-backed securities
remained under investigation. The status of any such probe is
unknown.
A Citigroup spokeswoman, Danielle Romero-Apsilos, declined comment
on Friday and a spokeswoman for the FHFA Office of Inspector General
did not respond to a request for comment.
The review of the evidence in the Citigroup case for potential cases
against individuals was conducted with the U.S. Attorney's Office in
Colorado, one of two U.S. attorney's offices involved in the
investigation.
According to the report, the review came at the request of the
Justice Department, which asked that all mortgage-backed securities
settlements reached with the government be reviewed to determine if
individuals could be held personally responsible.
Those settlements have included a $13 billion accord with JPMorgan
Chase & Co in 2013; a $16.65 billion deal with Bank of America Corp
in 2014. Most recently, federal and state officials announced $3.2
billion in settlements with Morgan Stanley on Feb. 25, which when
combined with a series of related resolutions resulted in $5 billion
in settlements with government agencies.
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Goldman Sachs Group Inc in January announced it had reached an
agreement in principle to pay over $5 billion to resolve federal and
state claims.
The Justice Department has faced years of criticism for failing to
prosecute banking executives over conduct leading up to the
financial crisis, even while it secured billions of dollars in
settlements with big banks.
The government cases came out of a task force formed by President
Barack Obama in 2012 to probe misconduct that contributed to the
financial crisis.
Obama said he was creating the group to "hold accountable those who
broke the law" and "help turn the page on an era of recklessness."
In February 2015, then-Attorney General Eric Holder said he had
given federal prosecutors a 90-day deadline to try to develop cases
against individuals related to mortgage bonds and report back if
they could be successful.
Despite that push, no such cases have emerged to date.
In the case of Citigroup, the $7-billion settlement explicitly did
not release individuals at the bank from criminal or civil charges
or the bank itself from potential criminal prosecution.
During the probe, authorities gathered 25 million documents related
to mortgage securities, obtained internal bank emails and documents,
and interviewed current and former employees and executives, the
inspector general report said.
"The totality of the evidence and testimony obtained showed that
Citigroup knowingly and purposefully purchased and securitized loans
that did not meet representation and warranties or in many cases
were outright fraudulent loans," the report said.
(Reporting by Nate Raymond in New York; Editing by Amy Stevens and
Nick Zieminski)
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