Judge plans to ap­prove Cit­i­group set­tle­ment

Los Angeles Times - - Business -

washington — A fed­eral judge said Fri­day that she planned to ap­prove the govern­ment’s $75-mil­lion set­tle­ment with Cit­i­group Inc. over charges that it misled in­vestors about bil­lions in po­ten­tial losses from sub­prime mort­gages.

U.S. District Judge Ellen Se­gal Hu­velle said she first wanted as­sur­ances that Cit­i­group would main­tain new poli­cies it adopted to en­sure it would avoid such vi­o­la­tions in the fu­ture. Cit­i­group and the Se­cu­ri­ties and Ex­change Com­mis­sion, which brought the charges, agreed to add such as­sur­ances to the set­tle­ment.

The SEC had ac­cused Cit­i­group of mak­ing mis­lead­ing state­ments about its hold­ings tied to high-risk mort­gages. Cit­i­group had said they were $13 bil­lion or less; the SEC said they ex­ceeded $50 bil­lion.

Hu­velle had ini­tially de­clined in Au­gust to ap­prove the deal. She ques­tioned why share­hold­ers should be pun­ished for the al­leged mis­con­duct of the bank’s ex­ec­u­tives.

On Fri­day, she said she could ap­prove the set­tle­ment in a few weeks, once the as­sur­ances were added.

SEC attorneys said the com­mis­sion would have to ap­prove the changes.

The $75 mil­lion that Cit­i­group is pay­ing rep­re­sents less than 0.3% of its $22.07 bil­lion in rev­enue in the sec­ond quar­ter of this year.

The SEC and Cit­i­group agreed that the money would be dis­trib­uted to share­hold­ers who were harmed by the al­leged vi­o­la­tions — but not to any Cit­i­group ex­ec­u­tives or di­rec­tors who were in place at the time in 2007.

For­mer Chief Fi­nan­cial Of­fi­cer Gary Crit­ten­den set­tled re­lated charges with the SEC by agree­ing to pay a $100,000 civil penalty. The for­mer head of in­vestor re­la­tions, Arthur Tildes­ley Jr., agreed to pay $80,000. Tildes­ley now is head of cross mar­ket­ing at Cit­i­group.

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