Citigroup Settles With SEC Over Fraud Allegations

By:  Daniel Sayani
10/25/2011
       
Citigroup Settles With SEC Over Fraud Allegations

Citigroup has agreed to pay $285 million to settle civil fraud charges that it misled buyers of complex mortgage investments just as the housing market was starting to collapse. The Securities and Exchange Commission brought forth the civil action against Citigroup, claiming that investors who bought into the deal (which involved, essentially, stuffing portfolios with risky mortgage — related investments, selling it to unsuspecting customers, and then betting against those investments) had been defrauded. The transaction involved a one-billion dollar portfolio of mortgage-related investments, many of which were handpicked for the portfolio by Citigroup without telling investors of its role or that it had made bets that the investments would fall in value. The SEC says that as investors lost millions, Citigroup made $160 million in fees and profits.

Citigroup neither admitted nor denied the SEC's allegations in the settlement. "We are pleased to put this matter behind us and are focused on contributing to the economic recovery, serving our clients and growing responsibly," Citigroup said in a statement.

The penalty is the largest involving a Wall Street firm accused of misleading investors before the financial crisis since Goldman Sachs & Co. paid $550 million to settle similar charges last year. JPMorgan Chase & Co. resolved similar charges in June and paid $153.6 million.

The SEC on Wednesday also brought a case against Credit Suisse, which played a smaller role in the transaction, and against one individual at each company.
 

Citigroup has agreed to pay $285 million to settle civil fraud charges that it misled buyers of complex mortgage investments just as the housing market was starting to collapse. The Securities and Exchange Commission brought forth the civil action against Citigroup, claiming that investors who bought into the deal (which involved, essentially, stuffing portfolios with risky mortgage — related investments, selling it to unsuspecting customers, and then betting against those investments) had been defrauded. The transaction involved a one-billion dollar portfolio of mortgage-related investments, many of which were handpicked for the portfolio by Citigroup without telling investors of its role or that it had made bets that the investments would fall in value. The SEC says that as investors lost millions, Citigroup made $160 million in fees and profits.

Citigroup neither admitted nor denied the SEC's allegations in the settlement. "We are pleased to put this matter behind us and are focused on contributing to the economic recovery, serving our clients and growing responsibly," Citigroup said in a statement.

The penalty is the largest involving a Wall Street firm accused of misleading investors before the financial crisis since Goldman Sachs & Co. paid $550 million to settle similar charges last year. JPMorgan Chase & Co. resolved similar charges in June and paid $153.6 million.

The SEC on Wednesday also brought a case against Credit Suisse, which played a smaller role in the transaction, and against one individual at each company.

Click here to read the entire article.

Photo: Citigroup headquarters in Manhattan, New York, New York

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