This excerpt taken from the C 10-K filed Feb 28, 2005.
TOTAL CAPITAL (TIER 1 AND TIER 2)
[EDGAR REPRESENTATION OF GRAPHIC DATA]
During 2004, we did not achieve our expectation of double-digit income growth. The WorldCom Litigation and Reserve Charge drove a decline in net income of 5% versus 2003.
In the 2004 second quarter, the Company recorded a $4.95 billion after-tax charge for settlement of the WorldCom class action lawsuit and an increase in litigation reserves related to Enron and other pending lawsuits and legal proceedings. This charge was an important step in addressing the financial impact of resolving these matters.
In the third quarter, the Financial Services Agency of Japan (FSA) issued an administrative order that required Citigroup's Private Bank to suspend all new transactions with customers and to discontinue operations by September 30, 2005. The administrative order was the result of an inspection by the FSA, which determined that there were fundamental problems in Citibank Japan's internal controls and governance structure, principally in its Private Bank operations. We have accepted the basis for the sanctions and have placed the utmost priority on complying with the FSA's directives. In the fourth quarter, the Company recorded a $244 million after-tax charge related to closing the Japan Private Bank.
During the third and fourth quarters, the Company recorded reserves of $196 million ($151 million after-tax) related to the expected resolution of the previously disclosed SEC investigation of transfer agent matters. These reserves now fully cover the financial terms that the SEC staff has agreed to recommend to the Commission for resolution of this matter.
In August, our European government bond trading desk executed a transaction in the European government bond market that involved large executions in various government bonds and futures contracts. We regret having executed this transaction as we failed to consider its potential impact on our clients and other stakeholders, including European regulators and treasuries, and because it did not meet our standards. The U.K.'s Financial Services Authority and other European regulators are investigating this transaction and we are fully cooperating.
During 2004, the Company took numerous steps towards the goal of improving the way we do business, including the strengthening of the independence and capabilities of our internal control and compliance structure. In the third and fourth quarter, Chuck Prince, CEO of Citigroup, personally met with more than 35,000 employees to emphasize our goal of becoming the most respected global financial services company.