U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19549 / January 31, 2006
Securities and Exchange Commission v. Victor J. Menezes, United States District Court for the Southern District of New York, Civil Action No. 06 CV 0701 (JFK)
SEC Settles Enforcement Action Against Victor J. Menezes
The Securities and Exchange Commission filed a settled enforcement action today in the U.S. District Court for the Southern District of New York against Victor J. Menezes alleging insider trading in the stock of Citigroup Inc. Prior to his retirement from Citigroup in December 2004, Menezes held various senior positions at the company, including Senior Vice Chairman of Citigroup, CEO of Citigroup's Emerging Markets division, and Chairman and CEO of Citibank, N.A.
The Commission alleges in its complaint that on March 28, 2002, as part of a cashless exercise transaction, Menezes exercised 825,960 Citigroup stock options and sold 597,000 of the resulting shares at a price of $49.99 per share to cover the taxes and costs of the option exercise. As part of the transaction, Menezes retained 228,960 shares. The complaint alleges that, at the time of this transaction, Menezes was in possession of material, nonpublic information regarding Citigroup's plan to report first quarter 2002 losses totaling hundreds of millions of dollars related to the company's Argentine operations, which Menezes supervised. According to the complaint, Menezes was also aware that Citigroup would miss consensus earnings estimates for the quarter.
On April 15, 2002, Citigroup issued a press release announcing its first quarter earnings, including significant losses in its Argentine operations. As a result of these losses, Citigroup missed consensus earnings estimates for the quarter by $.04 per share. Citigroup's stock price closed on April 15 at $45.92, down $1.18 from the previous day's close, and $4.07 lower than the stock price on March 28, when Menezes traded. By selling Citigroup stock before the company's April 15 earnings announcement, Menezes avoided losses of more than $1.5 million.
To settle the Commission's charges, without admitting or denying the allegations in the complaint, Menezes has consented to the entry of a final judgment permanently enjoining him from committing future violations of Section 17(a) of the Securities Act of 1933. The final judgment also requires Menezes to pay $1,567,557 of disgorgement, pre-judgment interest of $328,822.77 and a $783,778 civil penalty, for a total payment of $2,680,157.77.