To recap, this is what happened:Citigroup put together a CDO (a debt obligation) in which it selected "assets" to put into the transaction specifically for their crappiness. That is, they chose assets that they expected would decline in value.
The company then shorted the instrument it created, a position that would lose money if the CDO performed as expected and marketed to investors. They could only make money if the investor lost their shirt.
They did not disclose either their selection of the assets in the CDO or that they took the short to the people who were buying it!