While robbing a Citibank branch can earn individual citizens decades in prison, the Department of Justice is allowing corporate giant Citigroup executives to avoid criminal charges for the bank’s role in the financial collapse that caused thousands of Americans to lose millions of dollars.
Attorney General Eric Holder said at a press conference Monday that the Citigroup $7 billion fine and settlements like it so far have been punishment enough for big banks – that there has been a “deterrent impact from every substantial and historic settlement that we have worked out.”
According to settlement documents, from 2006 to 2007 Citigroup lured thousands of Americans into unstable mortgage loans and sold the resulting mortgage backed securities for tens of billions of dollars to investors. Holder said this practice contributed “mightily” to the financial tumble in the American economy in late 2007, which led to more than a million foreclosed homes and in some cases, homeless families.
Citigroup executives have admitted to the charges against the bank but they aren’t facing any criminal charges – a very different fate from the individuals arrested for robbing their banks.
James Watson decided to rob two banks in Westport, Connecticut, one of them a Citibank, after he found himself neck deep in medical bills and needed money for his children’s Christmas gifts. His attorney told the Connecticut’s CTPost he walked out of the 2012 robberies with only $972. For the effort and threatening bank employees with a knife, he earned 10 years in prison.
Michael McManus, more commonly known as the “White Glove Bandit” because he wore white latex gloves when robbing banks, was arrested in April 2012 after robbing four banks and collecting more than $32,000 in Manhattan’s Lower East Side. He threatened tellers with what looked like a revolver but later turned out to be a cap gun. He was captured on surveillance video holding up one of the banks, a Citibank. He was sentenced to 10 years in prison.
A father-daughter duo, John Charles and Shelby Dawn Applewhite, were sentenced to 15 years and 5 years respectively for their tag team robbery of three Dallas banks in May 2013. According to a FBI press release, John used a “dangerous gun” to threaten tellers. One of those, too, was a Citibank.
It should come as no surprise that low-level bank robbers will serve hard time for their crimes, while high-level corporate types often avoid criminal charges, according to Brandon Garrett, a University of Virginia law professor and author of the upcoming book “Too Big to Jail: How Prosecutors Compromise with Corporations.”
“There is a real moral concern with the difference in treatment of corporate offenders and the small fry that gets caught up in the criminal justice system,” Garrett said.
When it comes to Citigroup executives, Holder said a $7 billion fine is a credible deterrent to prevent wrongdoing and there shouldn’t be a need for criminal charges. Garrett doesn’t agree with Holder’s insistence about the “deterrent impact” of multi-billion fines and says they fail to punish the individuals who are potentially culpable.
“I don’t think that fines alone are deterrents, even really big fines,” Garrett said. “Fines can be passed on to shareholders.”
Michael Corbat, Citigroup chief executive officer, said in a press release Monday that not only will the company not pass on the bill to shareholders, but the settlement is “in the best interests of our shareholders.”
“…[It] allows us to move forward and to focus on the future, not the past,” Corbat said.
Citigroup has become the second bank in the last year to reach a settlement with the Department of Justice regarding the sale and marketing of subprime mortgages – a settlement reached after the DOJ threatened damaging lawsuits. The DOJ reached a $13 billion settlement with JP Morgan last year. These last two settlements have been seen as templates for upcoming negotiations with Bank of America.
“I think it’s impossible to make everyone whole,” Holder said at press conference Monday. “So what we try to do is too hold the institution and individuals accountable and to do what we can to bring some degree of relief.”
Of Citigroup’s $7 billion fine, $4 billion is going toward the Department of Justice, $500 million is going towards compensatory payments to state attorney generals and the FDIC and $2.5 billion is going towards consumer relief.
Should Citigroup or another major financial institution repeat such behavior, Holder said the Justice Department will not hesitate in taking civil action against banks if the need arises once again. He also said they have not ruled out the possibility of pursuing criminal charges.
“Understand something,” Holder said, “if for whatever reason that deterrent effect is not something that these institutions feel, this justice department will bring them to task yet again.”