WILMINGTON, Delaware - The board of Citigroup Inc was sued by an individual shareholder for the damage done to the bank by years of shoddy mortgage and foreclosure practices, which recently led to a costly fix agreed with regulators.
The lawsuit, filed on Wednesday in New York federal court, seeks to recover the spiraling costs stemming from numerous housing-related legal battles, from "robo-signing" lawsuits to "putback" litigation.
Citigroup did not immediately return a call seeking a comment.
The lawsuit by Michael Brautigam, who according to court papers owns 380 shares of Citigroup, notes that the directors did not contribute any money as part of a recent agreement with the regulators.
The agreement required 14 financial institutions to overhaul mortgage operations and to compensate borrowers who were wrongly foreclosed upon. Costs are expected to run into the billions of dollars, and financial penalties are still to be decided.
The lawsuit said that the current board, as well as four former directors including former U.S. Treasury Secretary Robert Rubin, breached their fiduciary duty to shareholders by failing to properly oversee the country's third-largest bank.
"They failed to implement and maintain adequate internal controls to manage the foreseeably immense financial fall-out from the inadequate residential mortgage loan underwriting standards," the complaint said.
In addition to seeking to recover the costs of poor oversight from the defendants, the lawsuit seeks reforms to corporate governance.
It seeks to put to a vote of shareholders' resolutions that would allow the removal of directors who breached their fiduciary duty as well as proposals to tighten oversight of foreclosure procedures.
The bank is already facing a slew of litigation stemming from the financial crisis in 2008 and the U.S. housing crash. Lawsuits include class actions by shareholders and "putback" litigation by buyers of now virtually worthless mortgage-backed securities that were packaged by the bank.
The case is Michael Brautigam v Robert Rubin et al, U.S. District Court, Southern District of New York, No. 11-2693.
(Reporting by Tom Hals; Editing by Richard Chang)
Copyright 2011 Thomson Reuters. Click for Restrictions.