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Citigroup Pays $1 Million Civil Penalty

Citigroup Global Markets has paid a $1 million civil penalty to Rhode Island for failing to oversee a father-son broker team who allegedly took advantage of elderly customers, state regulators said.

Citigroup received multiple complaints over three years about brokers Kenneth Lyons and his son, Scott, who both worked in the Newport office, but the firm didn't take immediate action, said Maria D'Alessandro, the state's superintendent of securities.

Citigroup did not admit any wrongdoing in the agreement, which was finalized. The company said in a statement that it now has "controls and leadership to safeguard and support the interests of our clients."

According to the agreement, Citigroup must hire a state-approved consultant to review its sales and supervisory rules in all Rhode Island offices.

The Lyonses began working in 1993 in the Newport office of Smith Barney, which was later acquired by Citigroup.

Kenneth Lyons retired in 1999 and his son stayed on until he was fired in 2003, according to the agreement between state regulators and the firm.

Christopher S. Gontarz, the attorney representing both Lyonses, said he cannot comment because he hasn't seen any documents related to the agreement and did not know that an agreement had been reached.

State regulators said the elder Lyons sold the home and furnishings of one elderly client, then allegedly forged documents allowing him to benefit from annuities he had sold her.

Scott Lyons is accused of repeatedly making unauthorized trades in his customers' accounts. Beside those trades, regulators said the younger Lyons transferred $47,500 from customer accounts into a personal account.

Scott Lyons was fired in October 2003 after he threatened a co-worker who reported an unauthorized trade to Citigroup officials, the agreement said. He is banned from working in the securities industry. 

(www.ananthpuri.com)

 
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