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Resisting Corporate Corruption, 3rd Edition by Stephen V. Arbogast

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Case 6Take CitiMortgage to the Feds?

“Upper senior management just told me and one of my peers that our asses are on the line if these defects didn’t come down. I take that as a threat. This is the final act pushing me to go a different way.”1

SHERRY A. HUNT, A VICE PRESIDENT in CitiMortgage’s (Citi) large O’Fallon, Missouri office, was a Quality Assurance (QA) officer. Her job was to spot credit and documentation problems with new mortgages. She was good at her job. Increasingly however, it seemed that CitiMortgage’s management didn’t want to hear about the problems her group discovered.

It was mid-2011. Hunt had been trying to get the attention of Citi management for over a year. In Hunt’s view, Citi’s quality assurance process was broken. The problem did not lay in her group’s ability to spot problems. Rather it lay in management’s determination to ignore its findings. Instead of avoiding flawed mortgages, management simply wanted to limit reported defects to 5% or less. To accomplish this, management established incentives for employees to “successfully resist” QA’s reported defects. Hunt especially recalled a January 2011 “Star Players” award ceremony. There, in front of over 1000 employees, individuals were congratulated for successfully resisting QA’s findings.2

It was amazing that such stonewalling was going on within Citigroup in 2011. Few institutions had paid a bigger price for flawed quality control. The bank lost almost $28 billion in 2008 alone. Much of that loss ...

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