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Citigroup Settles Class Action Lawsuit For $730 Million

Citigroup Settles Massive Lawsuit
Reuters
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FILE - In this Apri; 30, 2009 file photo, a sign for Citibank is shown at Citigroup headquarters in New York. For the 200,000 people with Citigroup credit cards who had their names, account numbers and email addresses stolen by hackers, the breach is mostly a nuisance. (AP Photo/Mark Lennihan, file)

NEW YORK (Reuters) - Citigroup Inc

Purchasers of the bank's debt and preferred stock between 2006 and 2008 claimed there were misstatements and omissions in the disclosures, Citigroup said in a statement announcing the proposed settlement.

The investors accused the bank of bank understating loss reserves for its high-risk residential mortgage loans and falsely stating risky assets were of high credit quality, according to Bernstein Litowitz Berger & Grossman, a law firm that represented pension funds and other investors in the case.

The bank denied the allegations and said it was entering into the settlement to end the litigation. It said the settlement would be covered by existing litigation reserves.

"This settlement is another significant step toward resolving our exposure to claims arising from the financial crisis," the bank said in its statement.

The class action was filed on behalf of purchasers of 48 offerings of preferred stock and bonds, the law firm said.

The proposed settlement, which will be reviewed by U.S. District Court Judge Sidney Stein in New York, comes after more than four years of litigation.

(Reporting By Karen Freifeld; Editing by Carol Bishopric, Bernad Orr)

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Before You Go

Bankers Who Want To Break Up Big Banks
Sanford "Sandy" Weill(01 of07)
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The former Citigroup Chairman and CEO told CNBC in 2012 that "we should probably... split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, and have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail."
John Reed(02 of07)
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Retired Citigroup chairman John S. Reed wrote to the New York Times in 2009: "Some kind of separation between institutions that deal primarily in the capital markets and those involved in more traditional deposit-taking and working-capital finance makes sense." (credit:AP)
Phil Purcell(03 of07)
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Phil Purcell, former chairman and CEO of Morgan Stanley, argued in a Wall Street Journal op-ed that the big banks should break their divisions up into separate firms. "These businesses should be spun off to give the value to shareholders and let investment banks be owned privately -- hopefully largely by employees... so that the interests of the owners and bankers are aligned," he wrote. (credit:AP)
David Komansky(04 of07)
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Former Merill Lynch CEO, David Komansky, is another former megabank CEO calling for the breakup of "too big to fail" banks, according to Simon Johnson. Komansky told Bloomberg TV that he "regrets" calling for the repeal of Glass-Steagall, which allowed banks to become bigger than ever. (credit:AP)
Sallie Krawcheck(05 of07)
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Former Citigroup CFO Sallie Krawcheck has argued that big banks are simply too complex to manage. (credit:AP)
Richard Parsons(06 of07)
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After announcing the end of his 16-year tenure on the board of Citigroup, Richard Parsons told Bloomberg, "to some extent what we saw in the 2007, 2008 crash was the result of the throwing off of Glass-Steagall. Have we gotten our arms around it yet? I don't think so because the financial-services sector moves so fast." (credit:AP)
Scott Shay(07 of07)
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Scott Shay, the founder and chairman of Signature Bank, wrote in American Banker that "reinstating Glass Steagall should be the highest priority" for financial regulators. (credit:AP)
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