WASHINGTON - The Office of the Comptroller of the Currency settled an enforecement action Thursday against Citibank involving a theft of at least $664 million in corporate bonds that Citibank had handled as a securities transfer agent.

Without admitting or denying violations of securities law, the unit of Citicorp agreed to adopt new policies, procedures, and safeguards to prevent a repeat of the fiasco that was said to have led to losses of millions of dollars at brokerage houses.

Remedies are to include hiring an outside auditor to monitor transfer-agent operations.

Brokerage's Lawsuit

Citibank was the first to be censured for violating transfer agent rules. The agency brought the charges after discovering that a corporation hired by the bank to destroy $111 billion in canceled corporate bonds had gone out of business before completing the job in 1985 and 1986.

Canceled securities with a face value of $664 million turned up at banks and brokerage houses in Europe and the United States as recently as last year.

Last April, Smith Barney Harris Upham & Co. sued Citibank to recover about $6 million it said it had paid for canceled bonds.

The OCC accused Citibank of "willfully" violating sections of the Securities and Exchange Act and of failing to report the possible thefts to the Securities and Exchange Commission and the Federal Bureau of Investigation.

"There were holes throughout the process," said Donald Lamson, assistant director in the securities and corporate practices division of the comptroller's office.

"From our standpoint, it was a situation that ended six years ago," said a Citibank spokesman. "Our standards are in basic compliance with what they are asking us to do."

In 1985 and 1986, Citibank sent 13 truckloads of canceled bond certificates to MSM, a New Jersey company, for destruction. No bank officer visited the site until 1987, when the bank found a vacant lot and an abandoned trailer, the OCC said.

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