BUSINESS ETHICS, LAW AND

SUSTAINABILITY

Collections and Crime : The Case Of Citibank In Indonesia

Case Resume

The case of Citibank in Indonesia describes several scandals faced by Citibank’s operations in Jakarta, Indonesia and its range from the embezzlement of millions of dollars by Citigold manager to the tragic collections related death of a Citibank credit card holder.

Matt Lelander is an operation and ethics officer for Citibank’s International division. He review and analyze the political and economic situation in Indonesia, Citibank’s dealings in Asia and Indonesia, and the two ethical and legal scandals plaguing citi in Indonesia, to develop an action plan to deal with the current scandals and prevent future problems in the region.

1. Political and economic situation in Indonesia. Indonesia has strong GDP growth rates, despite a slow global economy, balance of payment surpluses, and low volatility of exchange rate. But Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions.

2. Citibank in Asia and Indonesia. The American subprime loan fiasco has taken its toll on Citibank and Citigroup has

agreed to pay $590 million over claims that it deceived investors by hiding the extent of its dealings in toxic subprime debt, and make the Citigroup market value has dropped significantly losing close to 173 billion.

The business of Citibank in Indonesia is good and its has return on equity of 23.8% with net income increasing 4.8%. But the slight increase in percentage of non-performing loans to total loans. The number was up to 2% from 1.5% the previous year.

3. Scandals plaguing Citi in Indonesia. There are two ethical and legal scandals involving embezzlement and death on Citi’s premises. The first scandal involves a Jakarta socialite and the manager for Citigold Citibank’s

wealth management division, Melinda Dee. She is accused of stealing between 2 million and 4.4 million from clients, and she was arrested on charges of embezzlement and money laundering.

The credit card Irzen Okta (the victim) bill was Rp 48 million (around $5.500) and who was found dead by debt collectors. But the debt collectors involved were independent contractors and not Citibank employees. The family of Irzen Okta has filed a ($346 million) lawsuit against Citibank.

Azwimar Putranusa 29114335

Anindya Prawita Sari 29114337

Syachriani Syam 29114384

Anugrah Tri Padma 29114397

These crises has hit Citi group’s ‘bottom-line’ just as foreign banks are making a significant push into Indonesia. Because of the robust domestic demand in Indonesia, their profits jump 70% in the first half of 2012. The stark contrast in profit trends between competitors makes it imperative that Citibank take corrective actions.

Questions & Answers

1. What has led to this recent outbreak of scandals in the banking industry ? Negligence regulations and loose corporate governance would have to contribute, and

there seems to be a growing of conduct gap between a corporation’s beliefs and its action.

2. Are Citibank employees still adhering to Citi’s Code of Conduct ? Matt himself ? The Code of Conduct provides an overview of the key policies of which need to be

aware. Through their own individual commitment to the Code are uphold Citi’s legacy and ensure Citi’s future as a premier banking institution.

The four key principles in its corporate Citi’s Code of Conduct :1. Common Purpose-Citi’s goal is to serve their clients and stakeholders2. Ingenuity-Citi aims at improving clients’ lives though innovation3. Leadership-Citi strives to employ talented people4. Responsible Finance-Citi’s conduct is transparent, prudent, and dependable

The two ethical and legal scandals involving embezzlement and death on Citi’s premises by employees indicated that the employees are not adopt the Code of Conduct. In Code of Condact there are some of the condacts How Citi’s do Business :1. Fair and Free Markets2. Protecting Citi Assets3. Anti-Bribery and Corruption4. Suspicious Activity Reporting5. Anti-Money Laundering Compliance6. Anti-Boycott Laws7. Sanctions and Embargoes8. Antitrust and Fair Competition9. Tied Business Dealings10. Privacy and Security of Client Information, and 11. etc.

Matt Lelander is an operation and ethics officer for Citibank’s. He is considered a rising star in the banking world and he will soon be sitting on Citigroup’s board of directors. But he has drinking problem and driving while intoxicated. Matt driving citation and if the information becomes public his job could be in jeopardy. Matt also not adopt the Code of Conduct.Based on Code of Conduct Drug-Free Workplace, Citi maintains a work environment that fosters the health and safety of its employees and protects the integrity of its business practices. Being under the influence of illegal drugs or other substance abuse which renders you unfit for duty is prohibited in the workplace or while performing work-related duties.

3. Is Citi responsible for the actions of outside contractors ? What is Citi’s potential liability ? Yes, Citi is responsible for the scandal that makes one of the creditors Mr. Octa death.

That makes a massive scandal in Indonesia, because in this country that most of the population have a religion especially Muslim. Even Citibank want to responsible by

wrote off Mr. Octa debts and offered to pay his widow a monthly stipend and the education of his daughters, Mr. Octa family was refused and filed $346 million lawsuit against Citibank. This scandal becoming large because it making politicians angry with the news about that. So, After that incident Citibank given punishment such as Bank Indonesia ordered Citibank to stop taking on new credit card customers for two years and has barred it from opening new branches or recruiting new priority banking customers for one year.

4. What are the appropriate courses of action for Mr. Lelander with regards to these scandals and how can future ethical lapses be avoided ? Matt Lelander as hypotetical Citibank officer must confront, identify, and resolve

Reviews These dilemmas continually developing. At an Earlier time, Lelander have been faced with two Scandals that are owned by Citibank, embezzlement and death. Scandal in the past should be a lesson for Citibank to avoid and minimize the scandal further. It needs to be done with regard to this scandal that strengthen the ethics and culture of Citibank itself. On the issue of embezzlement posed by Melinda Dee, should be resolved by the parties concerned. Also with the problem of death. To overcome the scandal that already exist, Citibank need to improve performance so that with the scandal that has been circulating, does not reduce public confidence in the performance of Citibank. The scandal has happened indeed worsen the company's image, but professionalism was instrumental in easing the scandals that have occurred. So that the incidence of scandal does not happen again, then it needs to be made more stringent regulations to apply appropriate sanctions.

5. How should Matt respond to Jenny ? We think that Matt should not discuss about Citibank’s pricing strategies with Jenny, as

matter of fact discussion of pricing policies with competitors is violation of U.S. Antitrust laws. Its responsibility to be truthful with Citibank regarding his driving citation. But considering Jenny is kind of politely blackmailing him, Matt should refuse this request of Jenny with a bit of intimidation too, like stating that she also in the car with Matt and he doesn’t want anyone find out about that incident too.

6. How should he handle the dinner tonight with the Indonesian officials ? The Foreign Corrupt Practices Act (FCPA) prohibits payments or gifts to foreign

official in exchange for a favorable ruling, regulation, or business advantage. It has a broad application and will be applied to U.S. citizens operating abroad. So based on this regulation, its clearly forbidden to receive any gift.

7. Does Joan have any obligations under Citi’s code of conduct to report Matt’s unusual behavior ? We think Joan does not have any obligations under Citi code of conduct, citi only

recommend to speak to any of the contact provided if the person feel it needed be. Joan does not know what is really going on with Matt so the best thing she could do is ask Matt himself and help him resolve whatever it is Matt facing.