Courtesy of Pam Martens.
In a March 25, 2013 letter to Wall Street regulators, Senator Elizabeth Warren and U.S. Representative Elijah Cummings warned that “Criminal activity should not be shielded by regulators as if it constitutes proprietary information or trade secrets.” And yet that is exactly how Federal Courts and Wall Street regulators are functioning today – as sealed vaults for Wall Street’s dirtiest secrets.
Take the case of Abu Dhabi Investment Authority v. Citigroup. Abu Dhabi is a U.S. ally. It invests the surplus cash of the country through its sovereign wealth fund, the Abu Dhabi Investment Authority, known throughout Wall Street as ADIA. In 2010, ADIA charged Citigroup with lying and defrauding it out of $4 billion in connection with a $7.5 billion investment it made in Citigroup when the company was teetering in November 2007.
ADIA could not bring its charges in an open public courtroom. It had signed on to Wall Street’s kangaroo courts, otherwise known as mandatory arbitration, where the hearings are held in secret and the details and arbitration decision were to remain sealed from public view. All of ADIA’s claims were to be administered and heard by the International Centre for Dispute Resolution of the American Arbitration Association (AAA), a group that substitutes its own “neutral” arbitrators for judge and jury. In the ADIA matter, two of the three lawyers serving as the “neutral” arbitrators worked for law firms which had represented ADIA’s adversary, Citigroup.
ADIA’s claims were heard in arbitration in New York between May 2 and May 25, 2011. That was one year after the Securities and Exchange Commission (SEC) brought and settled a case against Citigroup for lying to the public about its true financial condition. The SEC charged Citigroup, its CFO, Gary Crittenden, and Arthur Tildesley, Jr., head of Investor Relations, with telling the public that Citigroup had $13 billion of subprime exposure when it knew its true exposure was over $50 billion.
Why did Citigroup lie? The SEC obtained emails that explained the culture at Citigroup: its executives elected to deceive the public and go with the $13 billion figure because it had never previously disclosed the rest of the $50 billion exposure and an executive asked them not to raise the issue now.
When the SEC has documented a casual willingness within Citigroup to lie about the true state of its financial affairs, one would have thought ADIA’s case against Citigroup would have been a slam dunk. In fact, ADIA lost in its arbitration against Citigroup.
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