

Woman Who Couldn’t Be Intimidated by Citigroup Wins $31 Million - stfu
http://www.bloomberg.com/news/2012-05-31/woman-who-couldn-t-be-intimidated-by-citigroup-wins-31-million.html

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shawnee_
_Hunt still remembers her first impressions of CitiMortgage’s O’Fallon
headquarters, a complex of three concrete-and-glass buildings surrounded by
manicured lawns and vast parking lots. Inside are endless rows of cubicles
where 3,800 employees trade e-mails and conduct conference calls. Hunt says at
first she felt like a mouse in a maze._

Accountability is a tough thing to manage when companies get to this stage.
The larger the institution, the less accountable every individual within that
institution tends to act. Organizational architecture pushes the risk
downstream while pulling the reward upstream.

 _Workers had a powerful incentive to push mortgages through the process even
if flaws were found: compensation. The pay of CitiMortgage employees all the
way up to the division’s chief executive officer depended on a high percentage
of approved loans, the government’s complaint says._

How does this organizational structure differ from the pyramid scheme, or MLM?
With scrutiny, it really doesn't. This organizational structure is what has
kept the Realtor-Broker model perpetuating for as long as it has: risk
essentially becomes decoupled from the reward for Brokers; they can push their
Realtors to pursue risky prospects because they get a cut every time.
Furthermore, when Realtors collude with their Brokers, they have collective
incentive to both negotiate prices _upward_ and take as large of a cut as
possible of that inflated amount. Missing from the equation is a system of
checks and balances.

CitiMortgage mortgage brokers' compensation being tied to volume means that
_turnover_ in the housing market is something they aim(ed) for. There is
something seriously wrong with this model.

The fact that nobody in the NAR or mortgage industry is being held accountable
is puzzling.

~~~
glesica
> The larger the institution, the less accountable every individual within
> that institution tends to act.

I'm reading _Liars and Outliers_ , by Bruce Schneier, and this is one of the
big points he makes in his discussion of how trust and security balance to
allow society to function.

There is a huge difference between personal morality and organizational
morality, for instance. Even if every person working for Citigroup had been
basically moral (in the sense that they wouldn't have committed fraud alone)
this still could have happened, and probably would have.

The argument that gets repeated ad nauseum, that things like this are the
fault of "a few bad apples", is just plain false. The bad apples certainly
exist (especially given that our society and economy reward anti-social
behaviors), but the incentive structure is the real problem. It's systemic,
there's no getting around that fact.

~~~
Florin_Andrei
TLDR: The more a company grows, the more inefficient and dysfunctional it
becomes.

~~~
oofoe
Try this: The more a company grows, the more efficiently dysfunctional it
becomes...

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patrickgzill
The total fine of $158 million, after Citi got billions in support, is
nothing, a mere rounding error on one of their quarterly reports. A simple
cost of doing business...

The key take-away is: no one at Citi went to jail for fraud.

~~~
mindcrime
Bingo! Give this man a cookie. It's bullshit that these guys perpetrated
outright fraud like this, and - at the end - nobody was really punished, even
though they basically _admitted_ they were guilty.

This shit is what gives capitalism a bad name... I'm as much a proud anarcho-
capitalist, Ayn Rand reading, Ludwig von Mises quoting, Gary Johnson
supporting libertarian as the next guy, and it pains me to get beat up for
believing in capitalism because of these crooks at Citi and BoA, when nobody
is being punished for their fraud. Capitalism does _not_ inherently entail
accepting fraud like this, but every time these asshats get away with this
kind of behavior, it reinforces all the negative images that people have about
capitalism.

If we're going to accept the idea that government (or something like
government) is to protect property rights and enforce a "rule of law" that
protects against this kind of fraud, then our government needs to step the
%$!# up and prosecute some of these assholes.

~~~
cynicalkane
In a corporate case it's hard--both legally and practically--to pinpoint
someone of guilty mind performing guilty acts beyond reasonable doubt. That's
why the corporation is a "legal person" that can itself be legally responsible
for stuff and get sued: corporate personhood arose partially as a solution to
this problem. This has borne out in legal practice, where even when there's
obvious blood in the water, prosecutors have trouble convicting all but a few
top guys.

Anyway, I also find your profanity-laden vitrol unbecoming of discussion on
this site.

EDIT: I guess it's now considered a sin to state an easily-verifiable truth
and ask for polite discourse.

~~~
maratd
> In a corporate case it's hard--both legally and practically--to pinpoint
> someone of guilty mind performing guilty acts beyond reasonable doubt.

What? We solved this problem a long time ago. Corporations are beneficial
because they provide liability protection to the employees. That's it.

In the case of fraud, we decided the corporate veil should be lifted.

So all you have to do is go through each individual in the corporation, see
what laws they broke, and go after them. It's very straightforward.

The problems occur when the corporations received ungodly amounts of money
from the government, when a government "appoints" individuals to positions
within the corporation, and when there's quite a bit of collusion between the
corporate entity and the government.

At that point, the government has very little incentive to prosecute and the
corporate entity has even more incentive to commit fraud.

~~~
cynicalkane
"Limited liability" and "corporate veil" refer to shareholder protection, not
employee protection. Traditionally shareholders, not employees, were on the
hook for lawbreaking.

Anyway, you say something like " _go through each individual in the
corporation, see what laws they broke, and go after them_ " as though it's
easy. In practice prosecutors have a hard time doing this even when they want
to for the reasons I just said. Some of the Enron guys were acquitted by a
jury, for example.

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bgilroy26
I've been hearing about this story a lot. Is there an angle?

Is it the idea that folks always have about how "if you go up against company
x's legal department you'll get destroyed no matter what"?

One lady winning doesn't really change the odds in general.

~~~
yashchandra
But it is worth learning about. Also, it shows that it _is_ possible though
very unlikely.

------
DigitalSea
It sickens me that Citigroup acknowledged they fraudently bought loans without
the required documentation and even in some cases said documentation was
forged or incomplete and all they got was a $185 million slap on the wrist.
What makes matters worse is that the people who have these mortgages are
completely oblivious as to what is going on. What makes the whole situation
even more laughable is the fact they got billions in bailout cash and yet were
only fined $185 million.

They didn't deny the allegations, why didn't someone go to jail over this?
They breached mortgage regulations and by the sounds of it most of their
purchased loans were fraudelent. Disgusting.

Even after the housing bubble popped it surprises me that banks are still
doing these kinds of things. The saying history repeats itself couldn't be
more true even if it tried.

------
sparknlaunch
It's a great story however skeptical of these retrospective views. I wonder
how much of her motives were driven by protecting the mortgage holders and the
economy; or protecting her career prospects.

Saying this, Hunt seems much more deserving than the former banker in this
article:

<http://gawker.com/5553737/>

------
planetguy
Can we get a version of this story with a less editorialistic headline?

This is clearly a "fits the narrative" type headline, hardy individual versus
big bad bank; and I don't _trust_ stories when they fit popular narratives.

Tell me the facts of the case, Bloomberg, I'll make up my own mind how I want
to _feel_ about it.

~~~
JabavuAdams
Run that in reverse: if the headline were less sensational, you'd
automatically trust the article more?

Just read the article. The headline is one sentence. You have to evaluate the
whole thing anyway.

------
horsehead
Wow. that's not an editorialized headline by bloomberg.

~~~
mcphilip
It's a post of an article from the Bloomberg Markets Magazine.

~~~
horsehead
In any case. It's not editorialized at all.

i'll hold up my sarcasm sign in case you missed it.

edit: the 'by bloomberg' remark was meant to convey that it wasn't the OP who
editorialized things.

