Citigroup paid a $2 million fine and fired a prominent technology analyst after authorities accused the bank of improperly leaking to the media unpublished information about YouTube and confidential research on Facebook's initial public offering.

William F. Galvin, the Massachusetts secretary of the commonwealth, accused a junior Citigroup analyst of sharing nonpublic information about Facebook to TechCrunch, a blog focused on the technology world. The disclosure included Citigroup's private revenue estimates for Facebook, as well as "Investment Risks" and "Investment Positives."

Citigroup fired the junior analyst in September, according to Galvin's order.

In a more surprising move, the bank Friday also terminated his boss, Mark Mahaney, according to a person briefed on the matter.

"We are pleased to have this matter resolved," a Citigroup spokeswoman said in a statement. "We take our internal policies and procedures very seriously and have taken the appropriate actions."

Mahaney, a star analyst who covered the recent wave of technology IPOs for Citigroup's San Francisco research team, was not accused of any legal wrongdoing over Facebook's public offering. Although the information came from his research, the leak came solely from the junior analyst.

Mahaney was, however, blamed for not thwarting the illegal activity. Galvin did not disclose the name of the junior analyst.


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Galvin's order further took aim at Mahaney for discussing YouTube's earnings with a reporter from a French magazine, Capital, without permission from Citigroup. The dialogue conflicted with Citigroup's policy that research analysts receive internal approval before talking to reporters. The bank, like most Wall Street firms, also prevents analysts from expressing a viewpoint on companies unless the information is published in a report.

But ultimately, according to the person briefed on the matter, the decision to fire Mahaney had less to do with a breach of arcane compliance rules than his perceived cover-up.

The French reporter approached Mahaney in April seeking projections about YouTube's revenue and earnings growth -- information that Citigroup had not yet published in a report. Mahaney gave a terse email reply that answered the essence of the reporter's questions.

But when a bank spokeswoman followed up to remind Mahaney about seeking approval before an interview, he denied ever emailing the reporter.

"I won't respond," he said, according to Galvin's order.

The reporter later informed Citigroup that Mahaney did in fact respond. According to Galvin's order, the analyst then asked bank employees to fudge the timing of the interview, an apparent attempt to avoid blame for not seeking approval.

When told that the accurate time was already submitted, he replied in an email cited in the order: "This could get me into trouble. Shoot."

It is unclear whether his emails amount to legal violations. But securities rules, Galvin noted, prohibit "unethical or dishonest conduct."

Galvin also cited past problems in which Citigroup rebuked Mahaney for granting a February interview to Bloomberg Radio about Facebook before he officially covered the company. On another occasion this year, Galvin said, Citigroup cited Mahaney for not receiving approval before going on Canadian television.

Despite the focus on Mahaney, the main legal violations stemmed from the disclosure of Facebook information.

In May, the junior Citigroup analyst emailed two TechCrunch employees to say "I am ramping up coverage of FB and thought you guys might like to see how the street is thinking about it (and our estimates)." He attached a "Facebook one pager," that featured an array of confidential information, including Mahaney's private revenue estimates meant as an internal guide for the bank's analysts.

Under securities rules and a nondisclosure agreement with Facebook, Citigroup analysts were banned from "disseminating written research" about the social networking giant until 40 days after the IPO. The restriction, which applied to all banks that helped take Facebook public in May, was created to prevent research analysts from improperly promoting companies in a bid to drum up business for bankers.

The rules were reinforced in a landmark 2003 settlement with several banks, including Citigroup. The case, led by a former New York attorney general, Eliot Spitzer, built a Chinese wall between Wall Street research analysts and investment bankers.

A TechCrunch employee sought to post the document on the Web, but the junior analyst balked.

"My boss would eat me alive," he said.