U.S. banking giant Citigroup Inc. has agreed to pay US$590 million to settle a class action concerning alleged disclosure failures in the run up to the financial crisis.
Subject to court approval, Citi has agreed to settle a class action lawsuit brought on behalf of investors who purchased its common stock between February 26, 2007 and April 18, 2008. The lawsuit alleged that the bank, and certain senior officers and directors, materially misrepresented its exposure to collateralized debt obligations (CDOs). It claimed that the bank and certain officials were aware of both the size of Citi’s CDO holdings, and their impairment, before it was disclosed to the public, and that the public disclosure caused its stock to decline.
Citigroup said that it continues to deny the allegations, and that it is only entering into this settlement “to eliminate the uncertainties, burden and expense of further protracted litigation.” The amount to be paid under the proposed settlement is covered by Citi’s existing litigation reserves, it says.
The plaintiffs’ law firm, Kirby McInerney LLP, says that the US$590 million settlement, which has been granted preliminary court approval, “represents a significant recovery relating to the subprime/credit crisis.”
Both sides are now seeking approval of the settlement from the U.S. District Court for the Southern District of New York, where the case is pending.
In a statement, the bank says, “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.”