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Citigroup's Menezes to Pay $2.68 Mln in Trading Probe (Update1) Jan. 31 (Bloomberg) -- Victor Menezes, Citigroup Inc.'s former head of emerging markets, agreed to pay $2.68 million to settle a federal insider-trading probe. Menezes, 56, exercised Citigroup stock options and then sold shares on March 28, 2002, when he knew the bank planned to announce ``hundreds of millions of dollars'' in losses in Argentina, the U.S. Securities and Exchange Commission said in a complaint filed in New York federal court today. The sales generated proceeds for Menezes of $29.8 million that he used to pay taxes. ``Mr. Menezes had access to better information than the public did about Argentina,'' Scott Friestad, an SEC official in Washington who oversaw the case, said in an interview today. ``He knew the company was going to miss analysts' earnings expectations.'' Menezes, once touted by analysts as a potential candidate to succeed Sanford Weill as Citigroup's chief executive, exercised 825,960 Citigroup stock options and then sold 597,000 shares 18 days before the largest U.S. bank announced a $2.2 billion loss from its business in Argentina. Shares of Citigroup tumbled to a six-week low after the loss was made public. The banker, who retired from Citigroup a year ago, didn't admit or deny the SEC's allegations under the accord, according to his lawyer, Elkan Abramowitz of the New York law firm Morvillo Abramowitz. ``Mr. Menezes is glad to get this behind him,'' Abramowitz said in an interview today. Avoiding a Loss Menezes used the proceeds of the sale to cover the taxes he incurred when he exercised his options, so that he didn't actually pocket any cash, the SEC said in its complaint. By doing so, he avoided losses of more than $1.5 million, the SEC said. ``This case is a reminder that cashless exercise transactions are no different from other stock sales from a legal standpoint,'' Friestad said. ``Executives are under a duty not to trade when they have material information that the market does not.'' Menezes was stripped of operational responsibilities in June 2002, becoming a senior vice chairman in charge of corporate acquisitions and executive recruitment outside the U.S. Weill, now Citigroup's chairman, blamed Menezes for underestimating Argentine losses by $2 billion, according to ``Tearing Down the Walls,'' a biography of Weill by Monica Langley, published by Simon & Schuster in 2003. ``Victor was a valued colleague whose talents and integrity earned him the respect of people both inside and outside our company over his more than 30-year career,'' said Citigroup spokeswoman Shannon Bell. ``We are pleased he has put this matter behind him.'' To contact the reporters on this story: Otis Bilodeau in Washington at [EMAIL PROTECTED]; George Stein in New York at [EMAIL PROTECTED] Last Updated: January 31, 2006 11:53 EST see also: http://www.usatoday.com/money/industries/banking/2006-01-31-citigroup-usat_x.htm -- Salaam ali kum. Gabe Menezes. London, England