Citibank bought billions of dollars in mortgage loan from the external lenders even who did not meet the criteria, required by Citi credit policy, in the last several years. Ultimately, the company was generating margin after selling them to Government Sponsored Enterprises (GSEs).
Sherry Hunt, a vice president and underwriter at Citi Mortgage in 2011, had been witnessing these frauds. This continued malpractice led Citi to sell Freddie Mac Pool and Fannie Mae to GSEs that were likely to default because of considerable defects that the companies had.
The company, for the U.S. Federal Housing Administration, approved hundreds of millions of dollars’ worth of defective mortgage insurance files. Sherry worked closely with her direct supervisor, after reporting this mortgage defects, to stop the purchasing of such defective loans. Although, her supervisor, later on, asked her to leave the company as she informed these issues to the chairman of the board.
Sherry faced serious threats from two of her seniors that claimed that she change the quality control unit’s report result. Sherry Hunt needed to find a way to convey about these escalating fraud, as she always was conflict avoidant.
This case asks students to recommend options for Sherry as her analysis reflects about the involvement of stakeholders. This case also provides help to instructor by incorporating the Kellogg-produced videos of the Hunt, the only interview with her on-camera, in which she told about the later consequences of her reporting of this fraud to Citi HR and later to the U.S. Department of Justice.
This case also determines the legislation and authorities pertinent to whistle-blowing in the U.S., such as the Sarbanes Oxley Act, the Dodd Frank Act, and the SEC Office of the Whistleblower. This case, being an outstanding case on Anti-Corruption, won the 2014 competition, which was sponsored by an initiative of the UN Global Compact, Principles for Responsible Management Education (PRME).
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