Citibank Will Not Pay $770 Million

Part Three: “Fake News” about $770 million fine

The dollar amount is worth a story in itself. Calling it a $770 million fine is misleading without these qualifiers:

Paid with deflated dollars: Since 2003 (when that Citi Protection Scam started) the US inflation rate has been a total of 34%. $50—adjusted for inflation since 2003—is now $67. A consumer tricked into paying $50 in 2003 for phony protection is not fully compensated in 2017 by a $50 “refund.” $67 would be closer.

The Consumer Financial Protection Bureau does not adjust fines for inflation. Corporate wrongdoers love that. Citibank had an incentive to drag the deal out because each year of inflation reduced the actual impact on Citi. Citi saved as much as much as 34% by paying with dollars inflated since Citi’s wrongdoing started.

Deductible cost of doing business: The “business costs” of corporate wrongdoing are also tax deductible. (Yes, you read that right.) It’s now Tax Time at Citi. Citi accountants are working on a package of deductible “business costs” from wrongdoing. Will they slip in legal costs associated with defense of “corporate wrongdoing” plus travel and business lunches. Maybe overhead. Every million counts.

The refunds were capped at $700 million. How much Citi actually paid would be a great story if the media ever did the sort of follow-up needed for public understanding of how much of big fines are really paid or deducted.

The bottom line: In the end Citi’s actual cost is far less than the $770 million headline. My projection of a $130 million reduction is the starting place. When Citi accountants get done, it will reduce that $770 million headline by many more millions.

Corporate Protection: Senator Patrick Leahy has twice proposed a senate bill to end tax deductibility for corporate wrongdoing. Each time Senate committees blocked and buried the senator’s bills to avoid hearings that could result in more public awareness.

Consumers should be outraged by the lack of detailed press and media coverage of tax deductions. A story with a headline like “How Much Will Citi Really Pay of a $770 Million Fine? would be on the money.




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