Citi fires Internet analysts, pays $2 million fine
Massachusetts regulator hits Citigroup for leaking nonpublic information relating to Facebook and YouTube.
Earlier today, Massachusetts fined Citigroup Global Markets $2 million for illegally disclosing nonpublic information. In the aftermath of the report, Citi was reported to have fired Internet analyst Mark Mahaney. Also, I can confirm that Mahaney is no longer with the firm.
Citigroup also fired an unnamed junior analyst reporting to Mahaney last month. The state's investigation did not implicate Mahaney in the leaks.
The report, issued today by William Galvin, Secretary of Massachusetts, does not mention Mahaney by name. It instead refers to a "senior research analyst at the company who had been covering the technology industry" since May 9, 2005. It said that (a similarly unnamed) junior analyst had distributed "written materials, by email, during a securities offering" relating to earnings projections for Facebook and YouTube in violation of Citigroup's policies prohibiting the distribution "of any written materials during the course of a securities offering and related quiet periods.
Citi participated as an underwriter in Facebook's public offering.
As part of the agreement, Citi, which did not contest the report's statement of facts, agreed not to violate the state's securities regulations in the future.
The regulator's report said that the junior analyst had improperly shared information with Capital Magazine, a monthly French publication, as well as with TechCrunch. It contains snippets of several emails between the junior analyst and reporters from those publications containing the disclosure of unauthorized information.
It's clear that the research assistant in question knew this was a breach of the rules. For instance, in a May 2 exchange with a reporter from TechCrunch, who was described in the report as a friend, the junior analyst wrote, "My boss would eat me alive" if the information he had forwarded got published.
"That's just an outline that I put together -- it will eventually become our initiation report at 30-40 pages," he wrote.
In an email note to another Citigroup employee asking about the communications, the junior analyst responded: "This could get me in trouble. Shoot," according to the report.
Citigroup wrote in an email to CNET, "We are pleased to have this matter resolved. We take our internal policies and procedures very seriously and have taken the appropriate actions."
Updated 11:05 a.m. PDT with comment from Citigroup and information that Mahaney is no longer with the firm.