Citigroup Inc. will pay a couple $3.1 million for not overseeing a broker, Reuters said on
September 17. The securities arbitration panel, created by the Financial Industry Regulatory
Authority, found the bank liable for losses. However, Citigroup proclaimed that it disagrees
with the award which was not supported by the facts or law.
Yet in 2010, Nasirdin Madhany and his spouse Zeenat Madhany residing in Orlando, Florida,
accused the bank of negligence, fraud and other misdeeds involving more than $1 million
in real estate investments they made. They both were customers of Scott Andrew King who
worked in Citigroup in 2002-2005.
The pair contends that King steered them to invest in a politician’s real estate developments,
Lawton Bud Chiles III, peddling investments privately. In 2007, when housing market collapsed
in the USA, Madhany’s investments depreciated. Moreover, the Madhanys and several
other investors signed personal loan guarantees in connection with a $12 million loan to
one of the projects by Wachovia Bank which went broke in 2009. Wachovia in turn sued all
the participants when the loan defaulted. The panel ruled that Citigroup must reimburse the
couple’s share of $10 million in the event they are required to pay the judgment amount.
The regulations of the U.S. financial industry prohibit the practice of “selling away”, when an
advisor vends investments without a firm’s knowledge.
Currently, Scott King is a broker for Wells Fargo. Both he and his current employer are not
available for comment.