Citi didn’t reveal M.Stanley role in Jackson CDO-report

May 21 (BestGrowthStock) – Citigroup Inc (C.N: ) sold certain
mortgage derivative products without disclosing to investors
that Morgan Stanley (MS.N: ) (Read more about the money market today. ) had helped select the underlying
mortgage bonds while it was betting against them, Bloomberg
said.

Citigroup had underwritten seven series of collateralized
debt obligations called Jackson Segregated Portfolio in 2006,
the report said, and the marketing documents for the $205
million portfolio did not disclose who selected the underlying
bonds.

A Morgan Stanley unit helped select the underlying mortgage
bonds for Jackson Portfolio, two people with knowledge of the
matter told Bloomberg.

Citigroup had arranged with Morgan Stanley to take over the
short positions once the Jackson deal closed, people told the
agency.

Six of the seven series of Jackson bonds later defaulted,
resulting in more than $150 million of losses to the investors,
according to data compiled by Bloomberg.

In April 2007, Moody’s Investors Service cut all seven
series of the Jackson bonds to “junk” grade, the report said.

Citigroup has not been publicly accused of any violations
tied to the Jackson deals, Bloomberg said.

It is not clear who the buyers of the securities were,
while the performance of the Morgan Stanley unit that shorted
the Jackson deals was also not known, the report said.

Citigroup and Morgan Stanley declined to comment, the story
said. Reuters could not immediately reach either company
outside regular U.S. business hours.

Stock Investing

(Reporting by Sakthi Prasad in Bangalore; Editing by Lisa Von
Ahn)

Citi didn’t reveal M.Stanley role in Jackson CDO-report