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Thursday, March 28, 2024 | Back issues
Courthouse News Service Courthouse News Service

Thumbs Up for Citigroup Mortgage Fraud Deal

MANHATTAN (CN) - Citigroup paying thousands of shareholders $8.5 million to resolve liability over the subprime-mortgage crisis constitutes a "fair, reasonable, and adequate" settlement, a federal judge ruled.

Participants in Citigroup's Financial Analyst Capital Accumulation Program have spent the last five years suing the bank for securities fraud on both coasts. Citigroup misled investors by overstating the value of subprime mortgages and downplaying the risks, the shareholders alleged.

Originally filed in California in 2009, the case was transferred to New York, where four years of litigation still left trial a long way away.

U.S. District Judge Sidney Stein on Tuesday described the legal wrangling that the settlement avoids.

"The complexity in this action, if litigated to a verdict, looms large," the nine-page opinion states. "Expert discovery and summary judgment and pretrial motions, as well as an extended trial and a possible appeal all would lie ahead and all would consume vast resources. Approval of this settlement will avoid that extended and costly litigation."

While it won't make it a dent in Citibank's finances, the settlement represents an estimated 2 percent of the class's out-of-pocket loss, the court found.

"In this case, absolutely nothing in the record suggests that a judgment greater than $8.5 million would challenge defendants' solvency," Stein wrote. "It would be fanciful in the extreme to even suggest it."

None of the 7,409 class members objected to the settlement, though one requested exclusion, according to the opinion.

"This positive reaction weighs heavily in favor of approval of the settlement," Stein wrote.

Attorneys involved in the case have not yet returned requests for comment.

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