Citi settles stockholder class-action suit for $590 million
Citigroup (C) will pay $590 million to settle a class-action lawsuit from stockholders, who claimed the bank made misleading statements about its exposure to several collateralized debt obligations tied to risky mortgages.
Investors in the class action bought Citi stock between Feb. 26, 2007, and April 18, 2008, just as housing began to collapse and credit markets froze. The average stock price fell by 46% from a $56.41 high during this period.
"This fall caused billions of dollars in shareholder losses and made Citigroup common stock the worst performing stock in the Dow Jones Industrial Average for 2007," according to a statement Wednesday from Kirby McInerney, the firm representing the investors.
Citi admits no guilt under the settlement and will pay investors from its existing litigation reserves.
"Citi will be pleased to put this matter behind us. This settlement is a significant step toward resolving our exposure to claims arising from the period of the financial crisis," the bank said in a statement. "Citi is fundamentally a different company today than at the beginning of the financial crisis."
The original complaint was filed in December 2008 and was amended to expand the class two months later. The settlement reached Wednesday is sill pending approval from the U.S. District Court for the Southern District of New York.
The bank has been settling several cases tied to the financial crisis. A jury cleared its former CDO structuring group director from Securities and Exchange Commission charges in July and is nearing a settlement with the agency.
Citi spent $480 million in legal costs during the second quarter, down from $601 million one year prior, according to its latest financial filing.
"Citi's legal and related expenses remained at elevated levels during the second quarter of 2012, and will likely continue to be difficult to predict," the bank said in its filing.