Citigroup Inc. (C:US) and Wells Fargo & Co. were accused of discriminatory mortgage lending by the city of Los Angeles, which seeks damages for reduced property tax revenue and the costs of maintaining foreclosed properties.
The city filed complaints against both banks Dec. 5 in federal court in Los Angeles. Citigroup and Wells Fargo have been engaged in discriminatory lending to minority borrowers since at least 2004, which placed the borrowers in loans they couldn’t afford and caused a high number of foreclosures in minority neighborhoods, Los Angeles said.
Liz Fogarty, a spokeswoman for New York-based Citigroup, said the lawsuit is without merit.
“Citi is proud of our efforts to make sure our lending standards are fair to all of our customers,” Fogarty said in an e-mailed statement. “Citi considers each applicant by the same objective criteria, which are blind to race, ethnicity, gender and any other prohibited basis.”
Tom Goyda, a spokesman for San Francisco-based Wells Fargo, said the accusations are baseless.
“Wells Fargo is deeply disappointed by the city attorney’s decision to file a meritless lawsuit rather than collaborate together to help borrowers and home owners in Los Angeles,” Goyda said in an e-mailed statement. “Wells Fargo has been a part of Southern California for over a century and we are proud of our record as a fair and responsible lender.”
The cases are City of Los Angeles v. Wells Fargo & Co. (WFC:US), 13-cv-09007, and City of Los Angeles v. Citigroup Inc., 13-cv-09009, U.S. District Court, Central District of California (Los Angeles).
Barnes & Noble Slumps After Disclosing SEC Accounting Probe
Barnes & Noble Inc. (BKS:US) tumbled as much as 11 percent after disclosing an investigation by the U.S. Securities and Exchange Commission into its restatement of earnings and a former employee’s allegation of improper accounting.
The New York regional office of the SEC notified the company that it had begun a probe on Oct. 16, according to a filing Dec. 5. Barnes & Noble, the largest U.S. bookstore chain, restated its earnings for the 26 weeks ended Oct. 27, 2012, because of “inadequate controls,” according to the filing.
The company, based in New York, said it’s cooperating with the SEC, including responding to requests for documents.
Mary Ellen Keating, a Barnes & Noble spokeswoman, didn’t immediately respond to a request for further comment.
SEC Questioned Twitter About User Growth Slowdown Before IPO
Twitter Inc. (TWTR:US), leading up to its Nov. 6 initial public offering, faced questions from the U.S. Securities and Exchange Commission about slowing user growth and whether people were losing interest in viewing ads -- the company’s main source of revenue.
The SEC called for details on how the microblogging website planned to deliver on its promises of fast growth, according to filings released Dec. 6. Though Twitter’s revenue had more than doubled over the past year, increases in users had slowed and there was no clear path to making a profit.
In its response, Twitter said its revenue growth would become increasingly dependent on its current users becoming more engaged -- as measured by how often they view their timelines -- since it expected the addition of new accounts to slow. Algorithms to target ads to users with related interests will be used to make them more effective and valuable to marketers, the San Francisco-based company said.
The SEC also asked for translations of some of Twitter’s lingo, such as its claim of a “virtuous cycle of value creation.” Twitter’s patent policy also was questioned by the SEC.
Twitter still needs to deliver on its business model. Its loss widened to $64.6 million in the September quarter from $21.6 million a year earlier, and it’s unlikely to be profitable until at least 2015, according to the estimates of analysts compiled by Bloomberg.
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J.C. Penney Discloses SEC Inquiry Into Finances, Offering
J.C. Penney Co. (JCP:US) disclosed that the U.S. Securities and Exchange Commission asked for information about the retailer’s finances, including a stock sale in September that it’s using to fund an attempted turnaround.
A letter from the SEC on Oct. 7 requested “information regarding the company’s liquidity, cash position, and debt and equity financing, as well as the company’s underwritten public offering of common stock,” Plano, Texas-based J.C. Penney said Dec. 5 in a quarterly filing.
The company said it’s cooperating with the SEC and providing the requested material. On Sept. 26, J.C. Penney announced an offering to sell as much as $932 million of new shares amid a turnaround effort.
J.C. Penney raised the ire of investors when it unveiled the September offering, which diluted them by 38 percent, because earlier that day the company said it was “pleased” with the turnaround. Since then, shareholders have filed several lawsuits related to the matter.
Kristin Hays, a spokeswoman for J.C. Penney, declined to comment.
Comings and Goings
John Thomas CEO Belesis Agrees to Wall Street Ban in SEC Deal
Anastasios “Tommy” Belesis, the founder of John Thomas Financial Inc., agreed to be banned from the securities industry in a settlement with U.S. regulators who had accused him of defrauding investors in two hedge funds.
Belesis, 38, “exercised undisclosed influence” on the funds’ adviser to steer fees to his brokerage, the Securities and Exchange Commission said in an administrative order. The agency barred Belesis from working with brokers or penny-stock offerings and ordered him and John Thomas to pay $500,000 each. InvestmentNews reported on the settlement Dec. 5.
John Thomas still faces allegations of penny-stock fraud by the Financial Industry Regulatory Authority.
Belesis, who was John Thomas’s chief executive officer, didn’t admit or deny the claims and the SEC didn’t find that he engaged in fraud, said Ira Sorkin, his lawyer at Lowenstein Sandler LLP. Belesis can apply for the securities industry ban to be lifted after a year, the SEC said.
Volcker-Rule Critic Raskin to Amplify Consumer Voice at Treasury
Federal Reserve governor Sarah Bloom could be alone in opposition to the Volcker rule when the regulators vote this week on the ban on banks’ proprietary trading.
In 2011 she said the rule wasn’t tough enough. The final version of the rule to be voted on this week is likely to be stricter than the original proposal. Later this month, the Senate may decide whether to confirm her as the Treasury Department’s No. 2 official and its highest-ranking woman ever.
Raskin, a Harvard Law School graduate, has criticized the speculative bets banks make with their own capital as an “activity of low or no real economic value.” As Maryland’s top financial regulator from 2007 to 2010, she took on payday lenders and helped write legislation giving homeowners more time to avoid foreclosure. That record suggests that at Treasury she’ll be hard on the financial industry and protective of consumers.
Raskin, 52, is in line for a job whose responsibilities have varied depending on the priorities of the Treasury secretary. Her resume suggests she will have a role coordinating implementation of the Dodd-Frank Act of 2010.
Raskin declined to be interviewed during the congressional approval process, a Treasury spokeswoman said.
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