Citigroup to Pay $590 Million to Settle Lawsuit (C)

PUBLISHED: Aug 30 2012 @ 09:32 | Comments (0) | More info about Ed Liston

Citigroup Inc. (NYSE:C) will be paying $590 million to settle a lawsuit by its shareholders, who claimed that the bank kept them in dark by not disclosing massive losses arising out of subprime mortgage assets before the baking crisis erupted.

Even though Citigroup denied the charges, it decided to close the issue as it wanted to eliminate the cost and uncertainty surrounding the litigation.

According to shareholders, Citigroup Executives were tight lipped about the state of affairs in the company between February 2007 and April 2008 even as it incurred huge losses from those complex toxic assets. Finally when Citibank did disclose its losses, shares were hammered, resulting in their losses, claimed shareholders.

This case was filed back in 2007 and arguably is one of the biggest settlements related to subprime mortgage crisis.

Following the credit bubble burst and subsequent banking crisis, Citigroup was one of the most severely affected banks. As it became financially weakened, Citigroup was included in the Government’s multi-billion dollars bailout package. The bank was offered $45 billion in bailouts; besides, it also relied heavily on emergency funds extended by the Federal Reserve, which it paid back with interest.

Citigroup said that it has set aside enough contingency funds to meet the costs of the settlement.

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