Citigroup bank agrees $590m crisis settlement

Citigroup bank agrees $590m crisis settlement

Citigroup has agreed to pay $590m to settle legal claims by shareholders that its executives lied about the bank’s growing problems before the financial crisis.

The bank denied the allegations, but said it agreed to the deal to eliminate the cost and uncertainty of litigating the class-action lawsuit.

Plaintiffs say Citigroup executives kept quiet between February 2007 and April 2008 about huge losses the bank faced on complex mortgage investments. When the problem was disclosed, they say, Citigroup’s share price plunged. They blame the bank for their losses.

The case, filed in late 2007, was one of the first major lawsuits related to the toxic investments that fuelled the financial crisis in 2008. It is also among the biggest proposed settlements of any crisis-related case.

In a statement, the bank said it is “pleased to put this matter behind us”.

It called the proposed settlement “a significant step” toward resolving the reams of litigation it faces as a result of the financial crisis.

Citigroup was one of the banks hit hardest by the crisis. As it faltered in the autumn of 2008, the US government made stronger banks take multibillion-dollar bailouts in part to mask Citi’s weakness.

Citi took direct bailouts totalling 45 billion dollars and relied heavily on other emergency programs from the Federal Reserve. It has repaid the money with interest.

The bank said in its statement that it is “a fundamentally different company today than at the beginning of the financial crisis,” having overhauled its risk management, reduced its risky investments and sold off non-core businesses.

Citigroup said it already has set aside enough money to cover the cost of the settlement.

The settlement is subject to court approval by US district judge Sidney Stein in Manhattan.

Citigroup rose 35 cents to $29.69 in afternoon trading.

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