Citi’s Rush to Recover $900 Million Meant ‘Hitting Phones’ Hard

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Two days after one of his employees mistakenly approved a $900 million payment to a group ofRevlon Inc. lenders,Citigroup Inc. executive Vincent Farrell was looking to report some good news about the bank’s recovery effort.

“Quick update, just crossed the 100MM mark,” Farrell, head of North American loan operations, said in an instant message to his boss.

“Good,” Brendan Zeigon, who oversees global loan operations and credit risk management services, messaged back. “I would love to get to 200.”

The two were in a fix. An executive was “on a war path” over the error — one of the biggest in the industry in recent memory — which happened as Citigroup was trying to make a periodic interest payment. Instead the bank wound up sending the creditors the full amount they were owed, more than 100 times what it intended to distribute. And, as administrative agent on the loan, it had come out of its own pocket.

Danielle Romero-Apsilos, a spokeswoman for Citigroup, declined to comment.

‘Lessen the Pain’

The chats were included as exhibits in atrial this week over Citigroup’s efforts to recover the funds, of which it has gotten back about $390 million. It has sued 10 asset managers for creditors that are hanging on to $508 million. The messages shed light on the internal tensions that roiled one of the world’s most important financial institutions in the days after it watched almost a billion dollars fly out the door.

The transfer was wired on Aug. 11. By late afternoon on Aug. 13, Farrell and Zeigon still seemed hopeful they’d be able to reclaim most of the money.

“Well 15% back on day 1 is good ish,” Zeigon said. “Let’s hope to get 50% by tomorrow..will lessen the pain for you and i.”

Read More: Citi’s $900 Million Misfire Happened During Software Switch

Citigroup made the error despite an approval process known inside the bank as “six eyes,” under which three people must be involved in reviewing and executing wire transfers that originate in the asset-based transitional finance group. The final set of eyes on the Revlon transfer was Vinny Fratta, a senior manager in global loan operations who reports to Farrell. Fratta testified that the payment was the result of “human error, and that I was one of the humans responsible for the error.”

‘What Would It Take?’

When asked whether he had been involved in talks about Fratta’s employment status since the error, Farrell told the court on Wednesday that he had taken part in discussions about Fratta’s performance. Asked if Citigroup was holding off on firing Fratta until after the trial, he said he didn’t know.

“It would be good to get at least half back by tomorrow,” Zeigon reiterated in the chat on Aug. 13. “We should get as many people hitting phones as needed.”

But by the next day, the outlook hadn’t improved. The funds were digging in, an administrator told Fratta in an email.

“They’ve pretty much said they aren’t returning at this time because they aren’t positive it was an error,” he said.

In a reply noting that the bank had alerted the lenders to the mistake and that the Wall Street Journal hadcalled it that, too, Fratta asked: “What would it take for them to be positive that it was an error?”

Read More

  • Bank Error in Your Favor: Citi’s Fight to Reclaim $900 Million
  • QuickTake: ‘Unjust Enrichment’ and Citi’s $900 Million Mistake
  • Revlon Lenders Allege Default With Debt Deal Nearing Close

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