So Citigroup misleads investors in 2007 about tens of billions of dollars of subprime assets it would eventually take huge losses on, and the SEC settles with it for $75 million. Citi shareholders (which very much include you and me, fellow taxpayer) pay for Citi screwing Citi shareholders. What a system!

Now, $75 million is a lot of money for you and me. But it’s not a lot of money for Citigroup. It works out to about 0.05 percent of Citi’s 2007 revenue and less than 5 percent of its profits that year. Or, as The New York Times puts it:

Furthermore, the $75 million penalty represents a tiny fraction of the more than $40 billion of subprime mortgage bonds that regulators say the bank failed to disclose. Banking analysts were stunned when they learned the true size of Citigroup’s gaping losses, which ultimately totaled more than $30 billion.

Again, Citi misled its shareholders—and everybody else—about $43 billion worth of subprime securities. And its CFO and investor relations guy get slapped with a combined $180,000 fine and the SEC says, somehow, that it wasn’t an intentional mistake. Zach Goldfarb of the Washington Post on this:

But the $100,000 fine for the Citigroup CFO, Gary Crittenden, seems marginal.

In 2007, the year of the alleged wrongdoing, Crittenden took home nearly $13 million in compensation, including $3 million in cash. He knew about the $50 billion in sub-prime exposure, but took steps that led the public to believe that the bank had only $13 billion in exposure, according to the SEC. For his alleged role in misleading shareholders, he is agreeing to pay less than 1 percent of 2007’s compensation.

That’s context that the other papers should have had.

But The Wall Street Journal is good to put this up high:

Some critics complained that the agency’s charge of unintentional fraud was relatively minor. Boston University law school professor Cornelius Hurley, after reading the complaint, said he thought the SEC made a case for tougher fraud charges. “But it appears they pulled their punch,” he said. Given the damage Citi caused itself and the industry, a $75 million penalty “doesn’t hurt Citigroup and it doesn’t send a message to the industry that it’s wrong.”

But one thing I still don’t get from all this coverage: How was this not intentional?

Here’s Yves Smith:

I guess I am a bit thick. In 2007, subrpime exposure was the thing investors were most worried about. Recall that the first acute phase of the financial was in August-September 2007, when the asset backed commercial paper started contracting and money market investors shunned funds that had any taint of subprime.

Recall also that Sarbanes Oxley, passed in 2002, provides that a public company’s principal executive and principal financial officers certify both annual and quarterly financial statements for accuracy and completeness.

Think of that context while reading this from the WSJ:

The SEC complaint detailed several points when Citi’s top financial officials were made aware of the higher exposures but chose to omit them from earnings reports. The omitted assets were super-senior slices of collateralized debt obligations, or CDOs, and “liquidity puts” requiring Citi to purchase CDO-backed debt if the debt couldn’t be sold….

During the third quarter, as subprime defaults rose, Citigroup was forced to exercise some of the debt liquidity puts, acquiring $25 billion of CDO-backed debt. Mr. Crittenden was aware of those purchases, and Mr. Tildesley knew of some, the SEC said.

Aware that losses on the subprime assets could hit $2 billion, Citi decided to preannounce its third-quarter earnings on Oct. 1, the SEC said. Although this included a reference to valuation declines in the “highest rated” debt slices without quantifying them, Citi repeated that its subprime assets had fallen to $13 billion.

Although an unnamed investment banker flagged the discrepancy to Mr. Tildesley, an unnamed investor-relations official—believing the investment bank had requested that the exposure not be disclosed—replied that there was “no choice” but to stick to the $13 billion figure. After being alerted to the discrepancy, Mr. Tildesley took no action, the SEC said.

Not intentional? What am I missing here?

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at