Citigroup Asks to Toss Suit Over Salomon Secretary Theft

(Corrects spelling of attorney’s name in third paragraph and throughout in story published yesterday.)

Citigroup Inc. (C) asked a New York state judge to dismiss a lawsuit by former Wall Street banker William Salomon, son of the founder of Salomon Brothers, who sued the bank in May over his personal secretary’s theft.

The former secretary, Karen Febles, was convicted in January of bank and wire fraud, money laundering and tax evasion and sentenced to 4 1/2 years in federal prison in July. Prosecutors said she stole more than $1.3 million from Salomon, who is 99, looting his bank accounts to pay for cars, cruises, jewelry and real estate.

Joseph Baumgarten, an attorney with Proskauer Rose LLP representing Citigroup, told Justice Eileen Bransten during a hearing today that while Citigroup hired Febles, Salomon supervised her and chose to entrust her with his personal affairs. Febles was acting “in deviation of her duties for her own interests and her own purposes,” Baumgarten said.

“She was supervised,” Baumgarten said. “Let’s make no mistake about this. She was supervised by Mr. Salomon.”

Salomon, who attended the hearing in a wheelchair, began working at Salomon Brothers, the investment firm founded by his father and uncles, in 1933 and served as a managing partner from 1963 to 1978.

After retiring in 1981, he signed a consulting agreement that gave him an office, two secretaries and support services, according to the complaint. Citigroup, which bought the firm that became Salomon Smith Barney Holdings Inc., assumed the contract in 1998.

Job History

Febles began working in 1997 for Salomon, and soon became his sole secretary, according to his lawsuit, which claims she stole more than $3 million from him. Salomon gave her power of attorney and allowed her to write personal checks, review his bank accounts and pay his household employees and expenses.

Salomon’s alleges that Febles, who made more than $90,000 a year, began doctoring his checks in 2005. Prosecutors said she bought a Range Rover and a Mercedes, spent more than $100,000 on cruises and paid more than $50,000 in rent in one year.

Citigroup was required to provide a “competent secretary” who wouldn’t steal in the scope of her employment, and the company should have known she was handling his personal affairs, Steven A. Berger, an attorney with Berger & Webb LLP representing Salomon, told Bransten.

‘Running’ Life

“She’s running his life in many ways,” Berger said. “They had to have known this. And if they didn’t know this they certainly should have known this.”

Baumgarten said it was up to Solomon to detect the thefts given his means and the services of the lawyers and accountants he retained.

“We’re not talking about a 90-year-old nonagenarian who’s alone or destitute or in any kind of financial distress or any other distress,” Baumgarten said.

Bransten deferred ruling on the motion after today’s hearing.

The case is Salomon v. Citigroup Inc., 651683/2013, New York state Supreme Court, County of New York (Manhattan). The criminal case is U.S. v. Febles, 12-cr-00406, U.S. District Court, District of New Jersey (Newark).

To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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