Citibank settles California False Claims Act charges

August 29, 2008  |  Press Releases

Citibank has agreed to settle charges by California Attorney General Edmund G. Brown Jr. that from 1992 to 2003, Citibank had been stealing money from its credit card customers through the use of an illegal “account sweeping” program. In 2005, the California A.G.’s office initiated its investigation to determine whether Citibank violated the state’s False Claims Act by filing false reports omitting any mention of the swept funds. Brown’s three-year investigation revealed that nationally, Citibank pocketed more than $14 million from over 53,000 customers, with the help of a computer program that pilfered positive account balances from credit-card customers and deposited the money into Citibank’s general fund.

When a Citibank employee uncovered the scam in 2001 and notified his bosses, the information was buried and the whistle blower was sacked for informing an internal audit team about the illegal credit sweeps. One Citibank executive reasoned, “Stealing from our customers is a business decision, not a legal decision.” According to Brown, the same executive explained that the illegal sweep program was necessary to fund the executive bonus pool.

Under the terms of the California settlement, Citibank will now be paying refunds with interest to its credit card customers and $3.5 million in damages and civil penalties to the State of California. In addition, Citibank will be prevented from future attempts at the credit sweeps and the company will submit to an independent audit to ensure that Citibank’s customers do indeed receive refunds in accordance with the settlement.

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