Citigroup Asks Court to OK $285 Million Settlement
Citigroup is appealing a judge’s ruling and asking for its $285 million mortgage-securities settlement with the federal government to stand. Both Citigroup and the Securities and Exchange Commission had cobbled together the agreement to resolve a federal lawsuit against the bank without going to trial.
With this appeal, as noted in a recent Bloomberg article, Citigroup hopes to reverse U.S. District Judge Jed Rakoff’s 2011 veto of the agreement. Paying the $285 million would let Citigroup dodge charges it misled investors who bought into a risky and complex $1 billion mortgage product.
In 2007, as this blog noted, Citigroup’s actions around the mortgage product cost its investors $600 million-plus, but resulted in a profit of $160 million for the bank. The proposed settlement includes the bank’s fees and profits, as well as $30 million in interest and a $95 million penalty. The SEC claimed the sum would go to investors Citigroup harmed.
However, Rakoff, who has a history of being stern with fraud, refused to accept it. A major sticking point is the SEC’s practice of agreeing to settlements without making the accused admit to wrongdoing. Rakoff had claimed without “any proven or admitted facts” he couldn’t rule on the relative fairness of the agreement.
Both the SEC and Citigroup beg to differ with RakoffEarlier this month, a Citigroup lawyer argued to a U.S. appeals court that forcing a company to admit to liability would bring regulatory enforcement to “a grinding halt.” A company conceding in a settlement that it had broken the law would allow shareholder lawyers to use the information in securities fraud lawsuits.
An SEC lawyer also asked the appeals court to let the settlement stand. The lawyer argued: “The monetary component [of a settlement] is frankly not something for the court’s proper consideration.”
If you were exploited in a securities fraud scam, call Sokolove Law today and discuss a securities fraud lawsuit.