For seven years, Robert Shattuck has argued that executives should pay for corporate wrongdoing — not the shareholders. Finally, someone is listening to him.
Manhattan federal Judge Sidney Stein has ordered lawyers for Citigroup and its shareholders to explain to him today why he should sign off on the bank’s proposed $590 million settlement over claims that the New York bank hid billions worth of toxic mortgage securities.
Stein has questioned several aspects of the proposed settlement, including the absence of any payments by former Citi execs.
Shattuck, a retired lawyer who has filed letters with the court to object to this settlement and others, said it marks the first time since he started waging his campaign that the issue will be addressed by a judge.
Most financial penalties end up being paid for by the company’s current shareholders rather than the individuals responsible. “If you want a deterrent effect, you go after the responsible officers and employees,” he said.
Citi shareholders, including several large public pension funds, sued the bank and its management, including former CEO Chuck Prince, for “concealing” the company’s exposure to toxic mortgage assets ahead of the financial meltdown.
Shareholders said they suffered from the “misrepresentations and omissions“ in the form of stock losses. Citi shares lost more than 90 percent of their value at that time.
The bank denied the allegations but agreed to pay $590 million to make the suit go away. The execs themselves, including Prince, didn’t have to cough up a dime.