Citigroup Inc (NYSE:C) received a court approval for its $730 million settlement with investors who accused the bank of misleading them regarding its exposure to mortgage backed securities and misrepresented information about the credit quality of the loans included in the investments.
Judge Sidney Stein on Citigroup’s settlement
In a court ruling today, United Stated District Judge Sidney Stein said the settlement agreed upon by Citigroup Inc (NYSE:C) and its investors was “fair, reasonable, and adequate.” Judge Stein gave his signal to complete the settlement.
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Experts representing the bondholders estimated $3 billion damages from their investment losses. However, Judge Stein pointed out that the $730 million settlement “represents a substantial amount.”
The judge also emphasized that the settlement has minimal objections and further litigation would be equally or more expensive and time consuming for Citigroup Inc (NYSE:C) and the investors.
Citigroup denied the allegations
Last March, Citigroup Inc (NYSE:C) denied the allegations of its investors including the Arkansas Teacher Retirement Systems, Louisiana Sheriffs’ Pension and Relief Fund, Minneapolis Firefighters’ Relief Association, and the City of Philadelphia Board of Pensions and Retirement.
The bank also rejected reports that it agreed to settle the case filed by the investors to avoid costs as well as the uncertainty of the litigation. The investors purchased bonds and preferred stocks of the bank from May 2006 to November 2008. They filed a complaint against Citigroup Inc (NYSE:C) in the Federal Court of Manhattan in 2008.
Citigroup 3rd largest in terms of assets
Citigroup Inc (NYSE:C) is the third largest bank in the United States in terms of assets. Mario Costiglio, spokesperson for the bank said, “Citi is pleased to put this matter behind us.”
On the other hand, John Browne, a partner at Bernstein Litowitz Berger & Grossman LLP, the law firm representing the investors in the lawsuit commented, “We and our clients are extremely pleased that the court approved the settlement, which we believe is an outstanding result for investors.”
Data compiled by Bloomberg showed that Citigroup Inc (NYSE:C) bonds declined after suffering losses during the collapse of the mortgage market in the United States. The bank’s 10-year notes worth $4 billion issued in November 2007 declined as much as 79.7 cents on the dollar in 2008. Citigroup suffered over $29 billion losses in 2008 and 2009.