A New York jury recently acquitted a former mid-level Citigroup executive of fraud, but also took the unusual step of adding a note to its verdict encouraging the Securities and Exchange Commission to carry out more investigations of Wall Street banks. The judge read the jury note from the bench, along with verdict.
On trial was Brian Stoker, a former mid-level executive at the bank. The SEC had charged him with misleading investors who bought a Citigroup CDO, or collateralized debt obligation. CDOs are financial instruments where banks bundle together a whole bunch of mortgages. The problem is that some of the mortgages are high-risk, some are low-risk, but they are all packaged together and sold to investors.
CDOs were one of the root causes of the mortgage crisis that turned Wall Street upside-down and sank the U.S. economy.
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Beau Brendler, the jury foreman in the Citigroup case, said there wasn’t enough evidence to convict Stoker, but the jury wanted the judge to know that they suspected wrong-doing at multiple levels at Citigroup. He said that’s why they sent the judge the note.
He said as he sat through the case, one question kept coming to him: “I wanted to know why the bank’s CEO wasn’t on trail.”
Brendler said the trial shed light on how banks, including the one that holds his mortgage, made risky investments with consumer money.
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“I’m trying to make my mortgage and these people are using hundreds of thousands of mortgages to basically gamble,” he said. “No wonder the housing market crashed, no wonder the economy crashed, why didn’t they know better?’”
Brendler said it seems that different rules apply to bank executives.
“That’s un-American,” he said.
The SEC’s chief prosecutor in the case spoke to Brendler after the trial and asked him if the verdict would have been different if they had prosecuted more high-level executives.
Brendler said he thinks the SEC should go after senior bank executives and CEOs.
“Let’s levy some fines that will really hurt. Let’s put some people on trial,” he said. “Treat these people the same way that regular citizens would be treated if they failed to pay their income taxes or ran out on their own mortgages.”
- Beau Brendler, jury foreman