Citigroup settled a longstanding civil complaint from the Securities and Exchange Commission over improper accounting during the economic crisis in Argentina in late 2001.
At that time, the Argentine government defaulted on some of its debt obligations, devalued its currency, and abandoned the one-to-one ratio between the Argentine peso and the U.S. dollar.
The actions of the Argentine government required Citigroup to account for the impact of the company's participation in a government-sponsored exchange of Argentine government bonds for loans, the value of Argentine government bonds held by Citigroup that were not eligible for the bond swap, and the sale of Banco Bansud, the Argentine subsidiary of Banco Nacional de Mexico, which Citigroup had acquired in August 2001. The government actions also resulted in the conversion of over $1 billion of Citigroup loans from dollars to Argentine pesos.
The SEC said that Citigroup accounted for each of these items in a way that did not conform with generally accepted accounting principles, against the advice of its auditor, and overstated its income. For the fourth quarter of 2001, Citigroup recorded $470 million of pre-tax charges related to Argentina and earnings per share of $0.74. If Citigroup had accounted for the four Argentina-related items in conformity with GAAP, said the SEC, the company would have recorded additional charges of at least $479 million pre-tax, or at least $311 million after-tax, and would have reduced fourth-quarter 2001 earnings by more than 8 percent.
The banking giant did not pay any money as part of the settlement, but agreed to a cease-and-desist order enjoining the company from any future violations. "We are very pleased to see this accounting matter from six years ago resolved without fine or penalty," said Citigroup spokesman Mike Hanretta.
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