New York, NYIn the latest news involving a mortgage-backed securities lawsuit, Citigroup will settle allegations of securities fraud for an undisclosed amount. Citigroup faced securities fraud litigation filed by the US Federal Housing Finance Agency (FHFA), which alleged the financial firm made misleading statements about its mortgage-backed securities.
According to Reuters (5/28/13), the lawsuit claimed Citigroup made false statements that misled Fannie Mae and Freddie Mac into buying mortgage-backed securities to the tune of approximately $3.5 billion. Of 18 securities fraud lawsuits filed against banks in 2011, this is the second to be settled. Combined, the lawsuits represent more than $200 billion in mortgage-backed securities.
Meanwhile, Citigroup and Allstate settled a separate lawsuit filed by Allstate against Citigroup, also involving mortgage-backed securities. Bloomberg (5/29/13) reports Allstate alleged in its lawsuit that it bought approximately $200 million in mortgage-backed securities from Citigroup based on fraudulent statements from Citigroup.
The Citigroup FHFA lawsuit is Federal Housing Finance Agency v. Citigroup Inc., et al, U.S. District Court, Southern District of New York, No. 11-06196. The Citigroup Allstate lawsuit is Allstate Insurance Co. v. Citimortgage Inc., 650432/2011, New York State Supreme Court, New York County (Manhattan).
Many securities fraud settlements fail to include an admission of wrongdoing on the part of the defendant, even when the defendant pays large sums of money to settle the lawsuit. These settlements include “neither admit nor deny” language. The Securities and Exchange Commission (SEC) has indicated, however, that certain civil settlements will require an admission of guilt on the part of the defendant. According to The Washington Post (6/18/13), cases involving “egregious intentional misconduct” or those involving obstruction of an SEC investigation may require an admission of guilt, as would lawsuits involving a large number of harmed investors.
The SEC had reportedly been hesitant to force an admission of guilt because defendants might be less likely to settle, drawing out the litigation process and delaying the time it would take to compensate investors. Two years ago, however, a judge threw out a $285 million settlement between the SEC and Citigroup, noting that because of the “neither admit nor deny” language, he could not tell if the $285 million was a fair settlement.
If you or a loved one have suffered losses in this case, please click the link below and your complaint will be sent to a securities fraud lawyer who may evaluate your Securities claim at no cost or obligation.