Citigroup in $590 Million Settlement of Subprime Lawsuit - NYTimes.com
Citigroup
said on Wednesday that it had agreed to pay $590 million to settle a
class-action lawsuit brought by shareholders who contended that they had
been misled about the bank’s exposure to subprime mortgage debt on the
eve of the financial crisis.
The shareholder lawsuit, originally filed in November 2007, contended
that the bank and some of its former senior executives and directors
had failed to disclose the bank’s huge holdings in securities known as collateralized debt obligations
that were tied to mortgage securities until November 2007, when it took
a multibillion-dollar write-down on them. Citigroup later wrote down
the C.D.O.’s by tens of billions of dollars more.
The bank had previously tried to conceal the deteriorating value of
its holdings by improper accounting practices, the shareholders
contended in an amended complaint filed in December 2008. “Citigroup
used inflated, unreliable and unsupportable marks to keep its
C.D.O.-related quasi-Ponzi scheme alive and to give the appearance of a healthy asset base,” the complaint said.
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