California Attorney General Edmund Brown announced a settlement with Citibank regarding the company’s illegal “account sweeping” program.
The company used a computer program that wrongfully swept positive balance accounts from credit-card customers into Citibank’s general fund. The Attorney General launched an investigation into Citibank in 2005 to determine whether the company violated the California False Claims Act by filing false holder reports with the California State Controller that omitted any reference to the swept funds.
A whistleblower had uncovered the scam and alerted his superiors but they buried the information and continued the illegal practice. In the words of a Citibank executive, “Stealing from our customers is a business decision, not a legal decision.” The same executive later said that the sweep program could not be stopped because it would reduce the executive bonus pool. The whistleblowing employee was fired.
Citibank will pay $3.5 million in damages and civil penalties to the State of California.