Opinion: Citi overlooked its executive's elder fraud for 9 years. What else could we be missing?

[Leroy N. Soetoro]

https://www.marketwatch.com/story/citi-overlooked-its-executives-elder-
fraud-for-9-years-what-else-could-we-be-missing-b43e1671

You may think that if your mom’s money is being handled by a financial
adviser at a world-famous, blue-chip bank, she would at least be safe from
outright fraud, right?

Think again.

The most astonishing thing about the case of former Citibank C, -0.55%
vice president Helen Caldwell, who has just pled guilty to fraud, is that
while working at the bank she was able to scam her elderly clients right
under Citi’s nose for at least nine years.

The case came to light after one of Caldwell’s clients developed dementia
and ended up in a nursing home, and the Cook County, Ill., public guardian
got involved in overseeing her affairs.

From 2014 until last year, Caldwell tricked three elderly customers into
blowing $1.5 million on shadowy movie ventures, including potential
slasher, horror and vampire movies, and a documentary about Cuba. (Wait,
what?)

During that time, the compliance department at Citi, apparently, noticed
nothing.

Citi refused to comment.

But maybe we shouldn’t be surprised.

In the modern blue-chip U.S. corporation, “compliance” and “oversight”
mostly rests on simplistic box-ticking and self-reporting — stuff that
makes compliance departments feel good, but does little or no actual good.

This includes maintaining impressive-sounding industry credentials.
Caldwell was a “registered financial adviser,” and held the Series 7, 63
and 65 financial licenses. These ensure a basic level of competence. They
do little or nothing to ensure honesty.

And it included filling out and signing a report for her bosses every year
confirming that, no, she definitely wasn’t engaged in any fraud, no sirree
Bob.

As the U.S. attorney’s office in Chicago put it in court documents,
Caldwell was able to hide her fraud from the bank “by, among other things,
submitting annual reports to [Citi] falsely certifying that her outside
business activities did not involving soliciting investments from [Citi]
clients or engaging in joint investments with [Citi] clients.”

How many crooks do these types of form even catch?

It makes you wonder why we bother with the police or a justice department:
Uncle Sam could just mail every citizen a form once a year, asking them to
self-certify that they aren’t breaking the law. What could go wrong?

During the nine years that Caldwell, 58, was faithfully filling out and
signing these absurd documents, she was meanwhile taking her clients’
savings and spending them on construction work at her home, refurbishing a
classic car, paying her property taxes, buying food and liquor, paying her
cellphone bills, paying off loans, buying stuff for her pets, buying home
furnishings and clothes, paying parking tickets, and paying for physical
therapy.

She also took some of the money through cash withdrawals.

One of Caldwell’s clients was in her 70s and one was in his late 80s.
Their money is now gone.

Caldwell’s attorney did not respond to a request for comment.

If this can go on for nine years without being detected, what else is
going on at big, blue-chip banks that we don’t yet know about?

The plus side is that when this happens at a big bank, there is someone
with deep pockets you can sue. Citi has a market value of more than $100
billion.

It’s a timely reminder to make sure that elderly relatives — or you —
aren’t being taken advantage of. Ask questions, double-check documents and
don’t just assume everything is OK. Elder fraud is an epidemic, and it’s
certain to get worse as America’s elderly population grows: Complaints to
the FBI numbered more than 88,000 in 2022, with losses totaling $3.1
billion — up 84% from the previous year.

And that’s just the stuff we know about.


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