Citigroup misled investors about company’s disclosures

Citigroup will pay $730m (£483.7m) to settle 48 investor claims that it made misstatements and omissions in disclosures before the financial crisis when the investors purchased its debt and preferred stock. Although, Citigroup denied the allegations, it said that it had agreed to settle the lawsuit to avoid further expenses and uncertainties that stem from a drawn out litigation.

The investors made purchases from May 11, 2006 through November 28, 2008. Citigroup said that the proposed $730m (£483.7m) payment will be made from its existing litigation reserves.The settlement will be reviewed by Judge Sidney Stein in the US District Court for the Southern District of New York, where the lawsuit is pending. Citigroup is currently undergoing transformation after Michael Corbat took over the helm following the abrupt resignation of previous chief Vikram Pandit. Since then, Michael Corbat cut 11,000 jobs, closed dozens of branches and trimmed the company’s consumer banking business in some countries.

It may be noted that in August 2012, Citigroup announced a $590m (£391m) settlement with investors who claimed that the company had hid its exposure to the collateralised debt obligations market to prop up its share price. The investors suffered heavy losses when Citigroup’s shares eventually fell. In that case, Citigroup also denied the allegations and said it was settling to avoid any more legal costs. Citigroup is still dealing with the fallout from the financial crisis, when the bank almost collapsed amid losses tied to sub-prime mortgages and took a $45bn (£29.82bn) bailout. The company’s stock slid 89% in 2008 through 2009 as the firm lost more than $29bn (£19.22bn).

In January, Citigroup announced a settlement with federal regulators related to its foreclosure practices. The bank allegedly took part in industry-wide practices that caused people to be foreclosed on illegally. Citigroup took a fourth-quarter charge of $305m (£202m) to cover its agreement with the Office of the Comptroller of the Currency and the Federal Reserve.