The Secret Broker: Tale of two Citi’s
The Secret Broker
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After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.
In 2008, Citibank managed to lose $18bn by doubling down on toxic mortgages, right at the very top of the market collapse in junk mortgage bonds, which led to the GFC we had to have.
Now in February 2020, Citibank has been rocked by another scandal involving their junk bond desk, but this time in London.
Luckily for global financial markets, it acted quickly to stem the damage to the global financial system by suspending a senior dealer before he could inflict any more damage on the banks liquidity ratio, cause a Lehman Bank type hurricane and incite more global panic than a sneeze on a cruise ship.
He was caught red-handed, flaunting Citibank’s internal controls, by sneaking out of the bank’s in-house canteen with a sandwich under his jacket and avoiding the checkout chick and her till.
Paras Shah, 31, managed to game Citibank’s internal financial controls before its compliance team stepped in and escorted him off the premises.
Citibank have not released the full financial details, though a tweet from a rival trader speculated it could involve as much as £4.50.
HISTORIC BANKING LOSSES
1995 – Barings $1.3bn on Nikkei options
1996 – Sumitomo $3.5bn on copper
2000 – Bawag $1.5bn on FX
2002 – AIB $700mm on FX
2008 – SocGen $8bn on Equity Index
2011 – UBS $2bn on Equities
2012 – JP $12bn on CDS
2019 – Citi £4.50 on a cheese sandwich https://t.co/R9153m1fks
— The CDS Trader (@thecdstrader) February 3, 2020
His salary (including bonuses) was estimated to be just over £1m a year.
At least the GFC taught management how to react when in a pickle (with cheese) situation.
Obviously, stealing a sandwich must indicate that this could be the start of an employee’s journey of a life to come and lead to bigger criminal actions against their employer.
In November 2016, Mizuho Bank had a similar incident after Marius Caracota, a former executive, was caught on CCTV nicking a £5 chain-guard from another colleague’s bicycle.
They fired him on the spot, and in March 2019 he decided to sue the bank.
The bank’s head of legal and compliance said in court that “I did consider whether a lesser sanction would be suitable but decided against this because bankers should have a strong moral compass”.
He also added that “stealing from a colleague was wholly inappropriate and counter to the bank’s values and culture”.
If only this attitude was around pre-2008, then the whole GFC fiasco could have been avoided.
Though, being fired in banking land is nothing compared to pilfering in civil servant land in Texas.
Gilberto Escamilla was sent to jail for 50 years after he was caught out with his scheme.
What started out as taking small amounts of meat from the commercial kitchen at the juvenile centre where he worked, ended when he was home ill and unable to intercept his illegally over-ordered monthly delivery of 360 kilos of meat.
Over a period of nine years, he stole $1.2m from the State of Texas’ coffers by over-ordering and on- selling to local restaurants.
As for me though, I never saw anything that led to a dismissal at work through petty theft, as front running orders or insider trading was the norm and dealt with an internal smack on the wrist (and then only if the firm got caught out).
So if an incident came along like someone caught stealing the odd biro, it would be classed as a ‘peccadillo’ incident and not bothered with.
Now, all of this writing about stealing brought back the memory of a story I read about as a kid, where a sweet old man was kindly employed as a senior Saturday casual at a large DIY warehouse.
He asked if it was OK to take home the offcuts of wood from the floor, and after his shift he would shuffle out the door with a wheel barrow piled high with offcuts.
It was only after two years that his employer realised he was actually stealing a new wheelbarrow every week, after being seen selling them at the local Sunday car boot sale.
With a criminal mind like that, I often wonder which bank or broker he worked for before he retired.
So now when Mrs Broker sends me out to Bunnings, I have to avoid any eye contact with the old boy who greets me at the entrance, just in case he may be an old boss of mine and just like old times tries to flog me what I’m looking for, from the boot of his car in the carpark.
The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at firstname.lastname@example.org.
Feel free to contact him with your best stock tips and ideas.
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When the Osbourne Effect doesn’t include a Sharon or an Ozzy
Taxed to death
When your newspaper had a mind of its own