Bloomberg News

Citigroup Said to Fire Mahaney, Settles Facebook IPO Case

October 26, 2012

Citigroup Fined $2 Million for Analysts’ Facebook IPO Disclosure

The Facebook Inc. 'like' logo is displayed on a computer screen and reflected in water droplets in San Francisco. Photographer: David Paul Morris/Bloomberg

Citigroup Inc. (C:US) fired Mark Mahaney, a senior technology analyst, according to a person with direct knowledge of the matter, as it settled a separate regulatory claim that a junior analyst disclosed confidential information before Facebook Inc. (FB:US)’s initial public offering.

Mahaney, 46, wasn’t ousted because of the Facebook case, said the person, who asked not to be identified because the move was private. The exit resulted from earlier actions uncovered in the course of the Facebook probe, the person said. Mahaney, who was based in San Francisco, declined to comment when reached today by mobile phone.

Citigroup agreed to pay a $2 million fine after a junior analyst e-mailed two employees at a technology website seeking feedback on a Facebook document containing a senior analyst’s views and estimates, Massachusetts Secretary of the Commonwealth William F. Galvin said today in a statement. As a part of Facebook’s underwriting syndicate, Citigroup Global Markets was barred from disseminating research until 40 days after the IPO, according to the statement.

“This penalty should serve as a warning to the industry as a whole,” Galvin said in the statement. “It is essential in these times of rapid and diffuse means of communications that financial institutions be vigilant to ensure that the rules on IPOs are observed by all their personnel.”

French Magazine

A slump in Facebook’s stock after it began trading May 18 has fueled shareholder complaints, regulatory probes and more than 40 lawsuits, with some investors claiming the Menlo Park, California-based social-network company’s managers failed to disclose revised forecasts before the IPO. New York-based Citigroup’s e-mail exchanges were provided to Galvin’s office on Sept. 14 in response to a subpoena, and the junior analyst was terminated about two weeks later, the watchdog said.

Galvin also subpoenaed Facebook’s lead underwriters, Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co., all based in New York, in connection with the decline of the company’s shares following the IPO, his office said. The stock has plunged 41 percent through yesterday since it started trading.

Separate from the Facebook incident, a senior analyst e- mailed unpublished information about Google Inc.’s YouTube revenue estimates to a French business magazine reporter on April 30, according to Galvin’s order, which didn’t identify the analyst.

Mahaney Reprimanded

A Citigroup communications employee told the senior analyst that he would need approval before answering the reporter’s questions, according to Galvin’s order. The senior analyst said he didn’t plan on responding, even though he’d already e-mailed answers to the reporter, the order said.

The e-mail on YouTube was sent days after the senior analyst received a reprimand for failing to obtain company approval for a public appearance, according to the order, which didn’t specify whether the message broke securities rules.

The senior analyst mentioned in Galvin’s order was Mahaney, said the person familiar with the matter. The e-mails were uncovered as a part of the Facebook probe, the person said.

Mahaney joined Citigroup in 2005 and had been covering Internet stocks since 1998, according to a company biography. Institutional Investor ranked him No. 1 for the Internet industry from 2008 to 2011. Mahaney has a bachelor’s degree from Amherst College, a master’s from Johns Hopkins University and an MBA from the Wharton School of the University of Pennsylvania, according to his biography.

Citigroup Faulted

Galvin faulted the Citigroup subsidiary for failing to supervise its analysts. The firm settled, admitted to a statement of facts and pledged to abide by state securities laws, he said.

“We are pleased to have this matter resolved,” Sophia Stewart, a Citigroup spokeswoman, said in an e-mail. “We take our internal policies and procedures very seriously and have taken the appropriate actions.”

She confirmed that Mahaney was no longer at the firm as of today.

Citigroup fell 2.2 percent to close at $36.60 in New York. The shares have risen 39 percent this year, compared with a 21 percent advance in the Standard & Poor’s 500 Financials Index. (S5FINL)

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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Companies Mentioned

  • C
    (Citigroup Inc)
    • $51.82 USD
    • -0.23
    • -0.44%
  • FB
    (Facebook Inc)
    • $79.04 USD
    • 0.04
    • 0.05%
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