4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs

Citigroup Employees in Company's Stock Plan Sue in District Court

Citigroup employees who participated in the ailing company's stock purchase plan filed a suit in district court yesterday (March 24), charging that the financial services firm concealed its exposure to toxic subprime-related and derivative products. The suit, filed by lead attorney James Clapp of Dostart Clapp Gordon & Coveney, seeks class action status. The lead plaintiffs are Daniel Brecher and Scott Short, both San Diego employees of Citigroup. The suit claims that employees of Citigroup and Smith Barney, its brokerage subsidiary, could invest 25 percent of pre-tax earned wages in the Voluntary FA Capital Accumulation Program. By the time the housing bubble burst, the equivalent of 43 percent of Citigroup equity was invested in subprime-related products, including $43 billion in derivatives, according to the suit.

Here's something you might be interested in.
Submit a free classified
or view all

Previous article

The glorious old trolley, Pt. Loma begonia gardens, drunk Frozen Chosin vet

Abalone's last stand, Vietnamese violin prodigy, surfers fight Oceanside Harbor
Next Article

The fate of Tijuana's 300,000 stray dogs

Injections instead of electocuting

Citigroup employees who participated in the ailing company's stock purchase plan filed a suit in district court yesterday (March 24), charging that the financial services firm concealed its exposure to toxic subprime-related and derivative products. The suit, filed by lead attorney James Clapp of Dostart Clapp Gordon & Coveney, seeks class action status. The lead plaintiffs are Daniel Brecher and Scott Short, both San Diego employees of Citigroup. The suit claims that employees of Citigroup and Smith Barney, its brokerage subsidiary, could invest 25 percent of pre-tax earned wages in the Voluntary FA Capital Accumulation Program. By the time the housing bubble burst, the equivalent of 43 percent of Citigroup equity was invested in subprime-related products, including $43 billion in derivatives, according to the suit.

Sponsored
Here's something you might be interested in.
Submit a free classified
or view all
Comments
13

Although many employees of profitable or up-and-coming companies feel otherwise, it is unadvisable to put one's savings and/or retirement funds into the employers stock. One reason is that it places everything in one company, the same one that provides an income. If it has bad times ("Can everyone say 'Citigroup' or 'AIG' or 'General Motors?') you not only lose your job, you lose your savings, likely lose your retirement plan and any hope for the immediate future.

The spectacle of Citigroup employees putting up to 25% of their earnings right back into an investment in the employer is just beyond the pale. It might be hard to resist the temptation to start buying huge amounts of your employer's stock during good times, but that's just what one needs to do. (Heck, if you want to buy that stock, buy it in the bleakest of times--like now--not when it is flying high.)

Yeah, those Citigroup employees have a bone to pick with the top management. But let's not forget that many of them are clueless, with no idea that their big, rich employer was taking them and a huge group of other stakeholders right to "the cleaners." How rich does one have to be in order to be pitied, not vilified? Many of those folks are rich, and with no right to blame anyone but themselves.

March 28, 2009

Although many employees of profitable or up-and-coming companies feel otherwise, it is unadvisable to put one's savings and/or retirement funds into the employers stock. One reason is that it places everything in one company, the same one that provides an income. If it has bad times ("Can everyone say 'Citigroup' or 'AIG' or 'General Motors?') you not only lose your job, you lose your savings, likely lose your retirement plan and any hope for the immediate future.

Actually Enron is the poster child for not putting all your eggs in one basket-diversify!

March 28, 2009

Response to post #1: It's not just the Citigroups and AIGs, once blue chip stocks, that came asunder completely. Look at some legacy blue chips those stocks have crumbled, although not as dramatically as Citigroup's, GM's, and AIG's: duPont, Pfizer, Pinnacle West, etc. Best, Don Bauder

March 29, 2009

Response to post #2: I don't think it's wrong to buy some of your employer's stock, especially if you are getting a discount of 15 percent. But I agree that it is unwise to load up too much on one's employer's stock. Best, Don Bauder

March 29, 2009

Response to post #2: I don't think it's wrong to buy some of your employer's stock, especially if you are getting a discount of 15 percent.

Many large Fortune 500 companes will give up to a 6% yearly match on stock purchase, I would take the 6% match- but nothing more.

March 29, 2009

Response to post #5: I know some in Silicon Valley that are getting 15 percent discounts. Best, Don Bauder

March 29, 2009

Brecher's example explains why Wall Street managers put the squeeze on the government to prevent the major players from falling into Chapter 11 Bankruptcy. In order for deferred compensation plans like Brechers to qualify for tax deferred status, federal laws require that assets in such plans remain completely at the risk of the business. Assets in such plans must remain on the employer's balance sheet and be subject to creditors claims in the event of bankruptcy. Most business executives contribute most of their earnings to these deferral plans and thus avoid paying income taxes until the money is pulled out or the stock is sold, usually at retirement. If Citi and the other major players filed Chapter 11, the money and shares executives have stashed in these plans would simply evaporate, wiping them out. This is the impetus behind the government bailouts.

March 29, 2009

But let's not forget that many of them are clueless, with no idea that their big, rich employer was taking them and a huge group of other stakeholders right to "the cleaners."

San Diegan Ernest Rady sold his company to Wachovia in exchange for Wachovia stock and a seat on the Wachovia Board. According to SEC filings, he did not sell his Wachovia shares. Even though Rady was on the Board, he rode his Wachovia shares right into the ground with losses approaching $2 billion. Even though he was on the Board he apparently had no idea how bad off Wachovia was.

March 29, 2009

Response to post #7: I'm not sure this is THE impetus behind the bailouts. I believe that the possibility of the global finance system unraveling because of a nuclear derivatives reaction is probably more important. Best, Don Bauder

March 30, 2009

Response to post #8: I don't know what happened to Rady on that one. Of course, if had bailed out of his stock, some would have thought he was doing insider trading -- jettisoning his shares before the collapse. He would not have gotten in trouble if he had unloaded some of them. Best, Don Bauder

March 30, 2009

I still maintain that the government chose to bail out Wall Street firms directly instead of forcing the firms to file bankruptcy because of pressure from top executives. These executives stood to lose perhaps hundreds of billions in deferred compensation under a bankruptcy scenario. The global economy would be better off had these firms been forced to file bankruptcy. In a bankruptcy scenario the government would provide “debtor in possession” financing to enable the firms to continue to operate as they do now. Creditors would file proofs of claim with the Bankruptcy Court that would be open to public inspection and debate. The government would provide financing to repay only those claimants whose existence is vital to the economy. The rest of the claims would be flushed down the toilet and creditors would receive nothing. In the event a claimant had multiple claims against financial firms, the government would limit the overall amount any one individual or group could receive. This crisis will go on year after year and trillions more will be wasted unless these firms are forced into bankruptcy. Time will prove my analysis is correct.

March 31, 2009

I still maintain that the government chose to bail out Wall Street firms directly instead of forcing the firms to file bankruptcy because of pressure from top executives. These executives stood to lose perhaps hundreds of billions in deferred compensation under a bankruptcy scenario.

Considering the deal Goldman Sachs received from AIG I would say this is a very likely scenario-especially in light of how MUCH bailout $$ they received in relation to the auto industry.

March 31, 2009

Response to post #11: I don't disagree that bankruptcy would be a better option. We just disagree on the reason for the bailout route: I think it was the derivatives, you think it was to rescue the brass. Time will tell. On a related point, the Obama administration has itself in hot water over its handling of GM and Chrysler: why should AIG, Citigroup, Bank of America, et al be rescued without the government demanding a wholesale cleansing of the board and top management, while Detroit gets the shakeup treatment? The government should state that it is looking into criminal violations by AIG. Lewis at Bank of America and Pankrit at Citi should be ousted now, along with the boards and several layers of top management of each institution. Best, Don Bauder

April 1, 2009

Sign in to comment

Sign in

Art Reviews — W.S. Di Piero's eye on exhibits Ask a Hipster — Advice you didn't know you needed Best Buys — San Diego shopping Big Screen — Movie commentary Blurt — Music's inside track Booze News — San Diego spirits City Lights — News and politics Classical Music — Immortal beauty Classifieds — Free and easy Cover Stories — Front-page features Excerpts — Literary and spiritual excerpts Famous Former Neighbors — Next-door celebs Feast! — Food & drink reviews Feature Stories — Local news & stories From the Archives — Spotlight on the past Golden Dreams — Talk of the town Here's the Deal — Chad Deal's watering holes Just Announced — The scoop on shows Letters — Our inbox [email protected] — Local movie buffs share favorites Movie Reviews — Our critics' picks and pans Musician Interviews — Up close with local artists Neighborhood News from Stringers — Hyperlocal news News Ticker — News & politics Obermeyer — San Diego politics illustrated Of Note — Concert picks Out & About — What's Happening Overheard in San Diego — Eavesdropping illustrated Poetry — The old and the new Pour Over — Grab a cup Reader Travel — Travel section built by travelers Reading — The hunt for intellectuals Roam-O-Rama — SoCal's best hiking/biking trails San Diego Beer — Inside San Diego suds SD on the QT — Almost factual news Drinks All Around — Bartenders' drink recipes Sheep and Goats — Places of worship Special Issues — The best of Sports — Athletics without gush Street Style — San Diego streets have style Suit Up — Fashion tips for dudes Theater Reviews — Local productions Theater antireviews — Narrow your search Tin Fork — Silver spoon alternative Under the Radar — Matt Potter's undercover work Unforgettable — Long-ago San Diego Unreal Estate — San Diego's priciest pads Waterfront — All things ocean Your Week — Daily event picks
4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs
Close