May 11 (Bloomberg) -- Citigroup Inc. was accused in a lawsuit by William Salomon of supplying the 99-year-old former Wall Street banker and son of the founder of Salomon Brothers with a personal secretary who was later convicted of stealing from him.
Salomon sued Citigroup over Karen Febles, who was convicted in federal court in Newark, New Jersey, of stealing $1.3 million from him to pay for cars, real estate, cruises and jewelry. The lawsuit, filed May 9 in state court in Manhattan, claims Febles stole $3 million through her “systematic theft.”
“Citigroup failed to institute any supervisory procedures whatsoever over Febles, notwithstanding that she was its employee working off-site for an elderly man and assisting him with personal financial matters,” Salomon’s lawyers claimed in the breach-of-contract complaint.
In 1933 Salomon began work at Salomon Brothers, the investment firm founded by his father and uncles, and he was a managing partner from 1963 to 1978. After retiring in 1981, he signed a consulting pact 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.
“Ms. Febles acted entirely outside the scope of her employment with Citi in handling the personal finances Mr. Salomon entrusted to her,” Mark Costiglio, a spokesman for the New York-based bank said in an e-mail. “She was prosecuted and convicted with Citi’s full cooperation. It is Ms. Febles, not Citi, who is responsible for Mr. Salomon’s financial loss.”
Febles, 48, began working in 1997 for Salomon, who soon decided he needed only one secretary, according to the complaint. Salomon “trusted Febles completely” to write personal checks, review his bank accounts and pay his household employees and other expenses.
In 2005, she began doctoring his checks to increase the amounts and pocket the difference, Salomon claimed. She also cashed checks by him, “just keeping the cash,” according to the complaint. U.S. prosecutors made similar claims at Febles’s trial in January, where Salomon testified.
“There’s no reason to have a personal secretary if you can’t trust her,” Salomon told jurors.
They convicted Febles on Jan. 14 of wire fraud, money laundering, and bank fraud. She also was convicted of failing to pay more than $250,000 in taxes. She is scheduled to be sentenced on June 5 in Newark. She faces as long as 30 years in prison on the bank fraud and wire fraud counts.
At the trial, prosecutors said she used the money she stole to buy a Range Rover and a Mercedes-Benz, spend $100,000 on cruises, and pay more than $50,000 in rent one year. Citigroup paid her $90,000 to $95,000 a year, prosecutors said.
Febles attorney Edward McQuat didn’t immediately return a call seeking comment.
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).
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