It really does seem as though the big financial companies have grown so large that they no longer fear any regulatory or legal body anywhere. It's as if the biggest of the big feel like they hold the key to the Doomsday Machine. You can just hear it, can't you? The taunts: "You want some mutual assured destruction? Fine, try to knock me down."

This week, the trouble comes in threes.

What's English for gingkoyaki?
After Japanese banking regulators effectively told Citigroup (NYSE:C) to shut down its private banking business in the country over massive problems, Fortune's Bethany McLean asked a rather damning rhetorical question: "Do you think Citi will ever get it? Or do corporate cultures just not change?"

This latest sin at the financial giant involves its inability to follow banking controls at its Japanese subsidiary, Citigroup N.A., where it has allegedly allowed clients to complete transactions in contravention of Japanese money laundering and securities manipulation statutes. Additionally, the company is accused of misleading clients about the risk of certain financial products, as well as overcharging customers.

The sanctions against Citigroup are the harshest against any bank operating in Japan in more than five years, according to TheWall Street Journal. Given the severe banking crisis that has beset Japan in that period of time, this is quite an accomplishment. Japanese clients have tended to be somewhat less forgiving and forgetful in the past than their American counterparts, at least temporarily shunning financial companies that have been involved in scandals. Apparently, this standard applies only to scandals that have taken place in Japan, as Citigroup's recent past would otherwise suggest that Japanese clients would be unlikely to consider it for passbook accounts.

This is another event in a long string of bad behavior from various components of the banking giant. In fact, Citigroup's apology to Japanese regulators is its second such mea culpa in a week. In Europe this week, Citigroup's sale of some $13 billion in European government bonds is under scrutiny by the Financial Services Authority, a British regulator, for wrongdoing. This goes on top of the unflattering reputation that Citigroup has earned from its role in various other scandals, from its $2.7 billion settlement of shareholder suits for tainted research on WorldCom -- now MCI (NASDAQ:MCIP) -- and from the $70 million fine it paid to the Federal Reserve because it violated lending laws. We're not that far removed from Citigroup's central role in the corruption of the dot-com bubble, where Wall Street banks attracted investment banking business by issuing flattering stock research on potential clients.

Can Citigroup change, or will its reputation drag it down? Don't laugh; Salomon Brothers -- now a Citigroup subsidiary -- most certainly started its spiral downward when its name was indelibly tarnished in an early 1990s government bond scandal.

Move a comma, make more money
If there is a company with more power on Capitol Hill than Fannie Mae (NYSE:FNM), I have a hard time thinking of what it might be. The massive mortgage finance provider, along with its sister company Freddie Mac (NYSE:FRE), have long threatened that increased oversight and regulatory control over their activities could have the effect of roiling the entire housing market in the United States, something that lawmakers desperate for an economic recovery are loath to do. Accounting questions -- particularly Freddie Mac's restatement of three years' worth of financial statements last September -- gave Congress some backbone to take a more critical look at these companies. One of the outcomes of last year's scandal came out today, when Fannie Mae revealed that federal regulators had found substantial questions on the soundness of the company, the adequacy of capital, and deficiencies in internal controls, and that the company had diddled with its expenses so that top executives could garner larger bonuses under their incentive plans.

The SEC has a word for things like this: a big "no-no."

As I noted last year, I find it unbelievable that the executive teams at Fannie and Freddie have managed to screw up what may be the sweetest deal in the history of mankind. Freddie and Fannie, as federally chartered institutions, have the implied faith and credit of the U.S. Treasury behind their debts. There is no statutory cap on their sizes, so these companies can simply take on more risk and pile on more debt with the spoils of success going to shareholders, the agony of defeat going largely to taxpayers. Should Freddie or especially Fannie collapse, the cost to the U.S. economy would be massive, so unlike companies where executive malfeasance is a risk only to the company's stakeholders, that there is even a question of Fannie Mae monkeying with capital is simply beyond the pale. If this isn't a scandal, it damn well should be. Those responsible shouldn't be entrusted to feed their neighbors' hamsters, much less run one of the most important, dangerous enterprises in the world, which is precisely what Fannie Mae has become.

In trouble AIG-ain
Most likely, you've seen those American International Group (NYSE:AIG) ads that harp upon the fact that the company has several hundred billion in assets under management and therefore must know a thing or two about managing money.

I have a new suggested ad: "We're AIG. We protect your money. Even when it's not really yours, but actually just debts that you want to hide. Even when we have to be recidivist law-breakers to do it."

Last year AIG settled SEC charges that in 1998 it had provided an inappropriate retroactive insurance policy to cellular phone distributor Brightpoint (NASDAQ:CELL) to help the company hide a quarterly loss that it would otherwise have had to report to shareholders. The SEC settled for $10 million, which AIG paid out of its sock drawer, and allowed AIG to settle without admitting to wrongdoing. At the end of a story I wrote about this last year, I predicted that the likelihood that AIG replicated this policy elsewhere "approaches 100%."

Well, well, well. In this latest charge, the SEC accuses AIG of helping Pittsburgh-based PNC Financial Services (NYSE:PNC) hide bad loans from shareholders. In 2002, PNC settled with the SEC on charges that it had shifted more than $762 million in underperforming loans and investments into three off-balance sheet entities, which were done with help from an AIG subsidiary.

In its disclosure, AIG noted that it had received a "Wells Notice," a formal notice that the SEC is considering civil charges against the company. This is all part of an SEC drive to hammer companies that assist other companies in committing fraud.

Well, hallelujah. It must be noted that in the cases of both AIG and Citigroup, these divisions are mere drops in the bucket compared with their overall businesses. But the issue for shareholders is not so much the acts, but the repetitive nature thereof, and the deep questions about the corporate cultures that have allowed such actions to go on in multiple events across various organizations within these companies.

As investors it is extraordinarily important that we be able to trust the information coming out of the companies we hold. With each of these three massive financial institutions, representing the largest banking, mortgage, and insurance participants respectively, the taint of ongoing fraud ought to make minority shareholders awfully nervous.

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Bill Mann holds shares in none of the companies mentioned in this story.