Charlie Gasparino: Citi Was Approached By SEC Over Accounting Issues (C)

Fox Business Network’s (FBN) Senior Correspondent Charlie Gasparino is reporting that CLSA analyst Mike Mayo says Citigroup is “cooking the books”, not accounting for Deferred Tax Assets, and the Securities and Exchange Commission (SEC) has “approached them over this issue at least twice over the last 18 months.” On the SEC’s alleged investigation into Citigroup’s accounting practices: “Mike Mayo is basically saying they are cooking the books in terms of they are accounting for some assets that they should be writing down something like 10 billion dollars worth of stuff called DTA’s. Citigroup is standing behind its accounting practices but the SEC has shown some interest in this issue of Citigroup’s DTA accounting. FOX Business has learned that Citigroup has been approached by the SEC over this issue at least twice over the last 18 months to back up why it is not accounting for this.” On whether Citi will continue to shut out Mike Mayo: “FOX Business Network understands that Citigroup may be softening on that. From what we understand, they have some plans to meet with Mr. Mayo after Labor Day saying, “We will meet with Mr. Mayo in due course.” They are starting to respond to the pressure here.” On Citi’s response to the alleged investigation: “Citigroup has been out all morning trying to tell reporters that there is another side of the story. Citi has no comment except, “The SEC asks us about a lot of things in the normal course of their reviews, including DTA.” So they are confirming this story.” On the law surrounding Deferred Tax Assets (DTA): “You can keep them on your books and you don’t have to write them down, unless you have three years of consecutive losses. Citigroup did very well coming out of the financial crisis, however in 2009 it did have a loss. 2007 was a huge loss for Citigroup, 2008, massive loss, they almost went under if it wasn’t for the federal bailout. 2008, the first 3 quarters they made money but that last quarter they showed a loss because they had to pay back that government bailout money. So three consecutive quarters of loss. If you read the law, they need to start writing down some stuff, and mayo says they need to write down something like 10 billion. And they are not.” On the government’s stake in this investigation: “Citigroup was the most bailed out of all the big banks. If they start writing this down because they are only marginally profitable, Citigroup will be in the loss. The government is looking at Citigroup’s DTA’s but the government also owns 18% of the company, it’s trying to unload its stake, which may be why they are dragging their feet a little bit on this.” On Mike Mayo being shut out: “None of the members of the senior management have met with Mike Mayo for the last two years. That’s almost unprecedented.” On the SEC’s interest in the issue: “This has taken on a life of its own because the SEC is clearly interested in this issue. We have calls into the SEC and we are waiting for a comment from them.” On the future of Citigroup: “Citigroup is a bank on probation. There wouldn’t be a Citigroup without the good generosity of the American taxpayers. Yet they have the gall to keep an analyst out. Who are they? What we needed before the financial crisis was more analysts like Mike Mayo. He’s not saying anything too outrageous. He calls them as he sees them. He doesn’t kiss up to these banks. If you listened to Mike Mayo early on about Citigroup, you might not have put your money in that bank.”