Much to their chagrin, Thomas Jones and Lewis Daidone, former executives at Citigroup, will have their day in court, as they’ve lost a motion to dismiss the civil securities fraud charges against them. The Securities and Exchange Commission has charged the two with misrepresenting and omitting material facts to customers relating to a switch from third-party transfer agent to one run by the company for Smith Barney Mutual Funds, a move that allegedly allowed Citigroup to pocket around $100 million over five years.
Jones, former head of Citi’s asset management division, and Daidone, a senior v.p,. and chief financial officer, had argued that the SEC had not proved its case. But U.S. District Judge Richard Case of New York felt otherwise. “In weighing the merits of Jones motions,” wrote the judge, “the court will accept the complaint’s allegation as true and draw all reasonable inferences in favor of the SEC. Citigroup Global Markets and Smith Barney Fund Management last year agreed to pay close to $210 million to settle fraud charges against then.