Citigroup to Pay $590 Million to Settle Investor Suit
JUSTICE, 3 Sep 2012
Citigroup said Wednesday [29 Aug 2012] it had agreed to pay $590 million to settle a suit by investors who accused the bank of misleading them on its subprime mortgage-based security losses in 2007-2008.
The agreement settled the four-year-old class-action suit that arose from the collapse of the US real estate market, which savaged the bank’s share price in part due to its heavy losses on collateralized debt obligations.
Investors who bought Citigroup shares between February 2007 and April 2008 accused the company of hiding its exposure to the CDO market, so they took heavy losses when it became public and the bank’s shares plummeted in value.
Citigroup denied the charges, but said it was agreeing to settle the lawsuit to avoid any more legal costs.
“This settlement is a significant step toward resolving our exposure to claims arising from the period of the financial crisis,” Citigroup said in a statement.
“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.”
The suit said Citigroup masked losses on its holdings of CDOs in 2006 and 2007 as the property market was collapsing.
That helped keep its share price high, above $47 in October 2007, before it plunged to below $2.00 in early 2009 after some $50 billion in asset writedowns.
The settlement only covered a subset of the group of investors who originally sued. The suit previously included investors claiming losses between January 2004 and January 2009, but the claims outside those included in Wednesday’s settlement were dismissed by the judge.
New York law firm Kirby McInerney LLP, which represented investors in the suit, called the settlement “a significant recovery relating to the subprime/credit crisis.”
DISCLAIMER: The statements, views and opinions expressed in pieces republished here are solely those of the authors and do not necessarily represent those of TMS. In accordance with title 17 U.S.C. section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. TMS has no affiliation whatsoever with the originator of this article nor is TMS endorsed or sponsored by the originator. “GO TO ORIGINAL” links are provided as a convenience to our readers and allow for verification of authenticity. However, as originating pages are often updated by their originating host sites, the versions posted may not match the versions our readers view when clicking the “GO TO ORIGINAL” links. This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.
Click here to go to the current weekly digest or pick another article: