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Citigroup Settles Lawsuit for $730M

Zacks Equity Research

On Monday, the U.S. District Judge in Manhattan, Sidney H. Stein received papers for the approval of Citigroup Inc.’s (C) $730 million settlement deal with investors pertaining to the purchase of the company’s stock. The settlement will be made to compensate investors, who were misleaded in the disclosures associated with the purchase of Citigroup debt and preferred stock during the period May 11, 2006 to Nov 28, 2008.

Investors filed a lawsuit against Citigroup in the federal court of Manhattan over the purchase of 48 offerings of preferred stock and bonds about 4 years ago. The complaint accused Citigroup of understating the loss reserves related to risky residential mortgage loans in the associated disclosures. The plaintiffs also claimed that Citigroup misrepresented and deceptively concealed the creditworthiness of risky assets by providing materially misleading statements.

Citigroup has refrained from accepting the accusations but agreed for the settlement to resolve the matter once and for all. Citigroup’s existing litigation reserves will be used for the payment under the proposed settlement.

Among other banking giants, Bank of America Corporation (BAC), The Goldman Sachs Group, Inc. (GS) and JPMorgan Chase & Co. (JPM) have also come up with similar settlement deals of lawsuits during 2012.

With the resolution of the lawsuits, banks plan to move forward with business strategies after attempting to end issues related to the financial crisis. Moreover, pending lawsuits can further trigger financial hassles while ruining the company’s image. Therefore, it is in the interest of the banks to resolve such matters at the earliest. Also, the settlement of lawsuits ensured justice for the investors who were deprived of their hard-earned money.

Citigroup currently retains a Zacks Rank #3 (Hold).

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