Another Result of the Financial Meltdown-Citigroup Agrees to Settle Class Action for $590 Million

by Mike Mintz on September 24, 2012 · 0 comments

in Banking

Citigroup recently announced its agreement, subject to court approval, to settle a class action lawsuit brought on behalf of shareholders who bought Citigroup common stock from February 2007 to April 2008, i.e. during the run up to the financial meltdown.  The plaintiff class contended that Citi’s management misled investors about the status of the bank’s health.  See In Re Citigroup Inc. Securities Litigation, 07 Civ. 9901 (S.D.N.Y.)  Citi later received over $40 billion from the infamous TARP program. Citi agreed to pay over half a billion dollars to settle this case.  The plaintiff class had claimed that Citi fraudulently misled them by misstatements and omissions contained in the company’s disclosures during this time period.  Not surprisingly, Citi completely denied these allegations and claims that it is settling in order to prevent incurring high expenses during a protracted litigation.  The money is to be paid out of Citi’s litigation reserves.

In a statement on the matter, Citi stated that:

Citi is fundamentally a different company today than at the beginning of the financial crisis. Citi has overhauled risk management, reduced risk exposures and through our core businesses in Citicorp, we are focused on the basics of banking, leveraging our unique presence throughout the emerging and developed markets to serve our clients and the real economy.

Southern District of New York judge, Hon. Sidney Stein will review the proposed settlement.  The case is currently pending in the Southern District of New York.

The settlement appears to be part of an effort on Citi’s part to resolve the remaining legal bills arising from the financial crisis.  This latest settlement comes on the heels of Citi’s agreement to pay $2.3 billion in payouts or penalties.  Citi also agreed several months ago to pay $1.4 billion in penalties to settle claims that it mistreated homeowners facing foreclosure.  Citi has already completed $54 million in mortgage debt reductions as part of the deal.  Additionally, Citi will be paying $158 million to federal authorities to settle claims that it tricked a government mortgage program into insuring ineligible loans.  Citi also agreed to pay $285 million to settle Securities and Exchange Commission charges related to a mortgage bond that Citi sold to investors.  Citi bet against the mortgage bond at the same time that it was selling it to investors. That settlement is pending court review.

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