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January 18, 2018 By Richard Bowen

Citigroup: The Poster Child of Bad Mortgages!

Sherry Hunt’s Citibank office

This past Sunday the PBS documentary produced by WNET, New York, about Sherry Hunt, one of my former chief underwriters (Sherry blew the whistle on Citigroup four years after I was thrown out for warning about their bad mortgages), and myself aired on KERA Channel 13, Dallas PBS.

The documentary, entitled “The Whistleblower,” is the first episode in a three-part PBS series called Playing by the Rules: Ethics at Work. It has aired in New York and several other cities around the country and in Dallas this past weekend, with most of the PBS stations airing it this month. You can watch it here and on the WNET website.

This Mona Lisa picture and Rascal Flat’s lyrics was posted in Sherry’s cubicle while she was at Citi

Sherry Hunt was a vice president and chief underwriter at CitiMortgage in O’Fallon, Missouri. Since 2005 she had flagged defects; 50 % of the loans she saw had defects, fraudulent defects. She complained and was ignored. I became her boss in 2006 and learned of her concerns which were also expressed by others.

Sherry Hunt in Bloomberg Markets Cover

I dug deeper, and it was worse than I could ever have imagined. While we reported that 95% of our mortgages met our policies, in reality, 60 % (growing to 80 %) of the mortgages did not. And yet Citi was certifying to the purchasers of many billions of dollars of these mortgages that they met our policies.

I was forced to leave in early 2008 after my continued warnings to my managers, the executive team and the board of directors, trying to tell them that a bomb was about to explode in this area. After my departure, Sherry continued to see defects and potential fraud.  Yet even after the bailouts, in late 2008, nothing changed.

Citigroup was the poster child for fraud when it came to credit controls, underwriting and mortgages. I lived this story, yet watching this documentary was disturbing. 

Subprime mortgages made it possible to buy homes even if you could not afford one. It seemed too good to be true and it was. In 2008 when the bubble burst, our economy was devastated and nearly collapsed. As you know the Federal government had to step in and rescue the banks. Citigroup was bailed out three separate times by the government for $350 billion in capital and toxic asset guarantees, resulting in the US Treasury owning 36% of the world’s largest bank.

Nothing changed! Even after the bailouts, nothing changed. In 2011 when Sherry, still an employee, was told to cook the books, she took a stand. As Sherry said, if you have to change something, you have to start and you can’t be afraid. She sued Citigroup for defrauding the government through FHA insurance fraud. Citi admitted the fraud and settled for a fine of $158 million; Sherry received $31 million. She did a hard and lonely thing.

We need whistleblowers now more than ever. Who’s looking out for ordinary people? It’s the last thing we have between illegal behaviors and the right thing to do. Has anything been fixed? There’s been no criminal prosecution, no real accountability.

As Professor Adam Waytz, who studied the psychology of whistleblowing and who wrote a Citigroup case study for the Kellogg School of Management about this situation says, “no one feels good about it.” His students ask, why have banking leaders escaped criminal prosecution? Why no accountability?

It’s David against Goliath, as Sherry’s attorney, Finley Gibbs said, ”If you’re willing to stand up and do your best, sometimes the little guy can win.”

I have written about the background and filming of the documentary and my story has appeared on 60 Minutes, McCuistion, KERA PBS Dallas and several other venues.

At the end of the day– we have to roll up our sleeves and take a stand. I’m honored to have been part of this story. Enjoy, please.

Honored to be featured in “The Whistleblower” film

P.S. The second episode of the series, entitled “Ask Why,” is about Enron whistleblower Sherron Watkins, with some of it also being filmed here at the University of Texas at Dallas. It will air in Dallas this Sunday, Jan 21st also at 10:30 AM on KERA PBS, Channel 13, and is also on the WNET website.

Related Posts

The Whistleblower: David vs Goliath — You Don’t Have to Be A Giant to Make a Difference
My Few Minutes of Fame – A PBS Miniseries on Business Ethics
The Kellogg Case Study Award on Anti-Corruption and Inspiration

What if Arthur Andersen's Auditors Had Spoken Up at Enron?
The House the Revolving Door Built

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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.

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"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years." ~ Dennis McCuistion, Host of the McCuistion TV program
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Presentation Topics

Playing for High Stakes: The Principles and Practice of Ethical Leadership

Dark Citi: The Story of a Whistleblower

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Now an ethical leadership speaker, Richard Bowen was Citigroup's Business Chief Underwriter during the housing bubble.

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