A former senior executive of Citigroup Inc. has agreed to pay some $2.7 million to settle insider trading charges brought by the Securities and Exchange Commission, the agency announced Tuesday.
Victor Menezes sold about $29 million in Citigroup stock in March 2002, a few weeks before the banking giant reported a substantial charge against its books, according to the SEC. The agency alleged in a civil lawsuit that by virtue of his position as CEO of the emerging markets division, Menezes knew in advance that Citigroup planned to report first-quarter losses of hundreds of millions of dollars from its operations in Argentina.
Menezes also was aware that Citigroup would miss Wall Street analysts’ earnings estimates for the first quarter of 2002, the SEC said in its suit filed in federal court in Manhattan.
Menezes neither admitted nor denied wrongdoing under the settlement, which calls for him to pay around $1.6 million in restitution plus interest and a civil fine of $783,778.
“He determined it was in his best interest to put the matter behind him so he’s pleased to reach the agreement with the SEC,” said Menezes’ attorney, Elkan Abramowitz.
In the transaction at issue, Menezes wound up with a substantial number of Citigroup shares, “so he didn’t just sell the stock and run,” Abramowitz said.
Menezes sold 597,000 Citigroup shares, earning some $29 million, in a March 28, 2002 transaction that involved exercising stock options that were part of his compensation package. He also purchased stock, ending up with 234,004 shares, according to a filing he made with the SEC at the time.
Abramowitz has said that the transaction had been approved in advance by Citigroup.
Menezes spent 32 years at Citigroup, the largest U.S. financial institution, becoming senior vice chairman and a co-director of its global corporate and investment bank. He worked on the deal that created Citigroup in its current form in the late 1990s.
Menezes, who is 56, retired in December 2004.
On April 15, 2002, Citigroup reported a $519 million charge for the first quarter from losses in Argentina, where the government had frozen bank accounts and devalued the currency in a financial crisis. Citigroup announced earnings of 74 cents a share for the quarter, below analysts’ target of 78 cents.