On Monday, the U.S. District Judge in Manhattan, Sidney H.
Stein received papers for the approval of
) $730 million settlement deal with investors pertaining to the
purchase of the company's stock. The settlement will be made to
compensate investors, who were misleaded in the disclosures
associated with the purchase of Citigroup debt and preferred
stock during the period May 11, 2006 to Nov 28, 2008.
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Investors filed a lawsuit against Citigroup in the federal court
of Manhattan over the purchase of 48 offerings of preferred stock
and bonds about 4 years ago. The complaint accused Citigroup of
understating the loss reserves related to risky residential
mortgage loans in the associated disclosures. The plaintiffs also
claimed that Citigroup misrepresented and deceptively concealed
the creditworthiness of risky assets by providing materially
Citigroup has refrained from accepting the accusations but agreed
for the settlement to resolve the matter once and for all.
Citigroup's existing litigation reserves will be used for the
payment under the proposed settlement.
Among other banking giants,
Bank of America Corporation
The Goldman Sachs Group, Inc.
JPMorgan Chase & Co.
) have also come up with similar settlement deals of lawsuits
With the resolution of the lawsuits, banks plan to move forward
with business strategies after attempting to end issues related
to the financial crisis. Moreover, pending lawsuits can further
trigger financial hassles while ruining the company's image.
Therefore, it is in the interest of the banks to resolve such
matters at the earliest. Also, the settlement of lawsuits ensured
justice for the investors who were deprived of their hard-earned
Citigroup currently retains a Zacks Rank #3 (Hold).