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.
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.
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.
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.
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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.
Between CIti’s purchase of Ameriquest loans when they went into BK, and the litany of “servicers” they utilize, these entities have destroyed America’s land titles and millions upon millions of families lives. What they have done is beyond criminal and should be met with the strongest recourse from the Justice System. If we can ever get our courts back, they deserve to hang.
The Financial Crisis Inquiry Commission, based solely on my evidence and testimony, sent a referral for criminal prosecution to AG Holder, who covered it up until the statute of limitations had run out, as he did with the other 10 FCIC criminal referrals on large banks sent to him. https://upk.187.myftpupload.com/senator-warren-calls-out-the-doj-they-ignored-11-congressional-commission-criminal-referrals/
So I agree with you.
So, has anything changed since the suit by Sherry Hunt? Just because Citi paid a fine, did they actually CHANGE anything internally or is it still “business as usual”…??
The FHA fraud was only a small part of what was going. There have been many fines for other activities, so it is doubtful anything has changed http://wallstreetonparade.com/2017/04/why-hasnt-citigroups-banking-charter-been-yanked/