Citi Fined In Cemetery Hedge Fund Case

May 28 2010 | 10:09am ET

Citigroup has agreed to pay $1.5 million to settle charges that its supervisory failures allowed one of its brokers and two customers to misappropriate some $60 million in cemetery trust fund money, including hedge fund investments.

Under the scheme, Smith Barney broker Mark Singer arranged to have Clayton Smart buy 28 cemeteries in Michigan from Craig Bush, using $28 million improperly transferred from the cemeteries’ trust funds to Smart. Smart then used more of the trust fund money to buy cemeteries and funeral homes in Tennessee as part of a scheme that ran from 2004 through 2006, according to the Financial Industry Regulatory Authority.

Citi was rapped for missing a veritable forest of red flags, including in February 2005, when it learned that Smart might be misrepresenting his acquisition of hedge fund investments owned by the Michigan cemetery trusts, using that investment as collateral for a $24 million credit line from Citigroup Private Bank.

Both Smart and Singer have been charged criminally; the latter is awaiting a second trial in Tennessee after the first ended in a mistrial.


In Depth

U.S. Treasury Moves on Reinsurance Loophole

Apr 24 2015 | 5:11pm ET

The U.S. Treasury Department has released proposed rules aimed at limiting the ability...

Lifestyle

Artivest Announces Funding Round Led by KKR & Co.

May 4 2015 | 9:56am ET

Artivest, a startup that provides individual investors with access to private equity...

Guest Contributor

Starting a ‘40 Act Fund Family? Don’t Forget Your Board

Apr 30 2015 | 7:18am ET

The convergence of the hedge fund and mutual fund worlds continues unabated, as...

 

Editor's Note