By Dow Jones Business News,
July 14, 2014, 07:15:00 AM EDT
By Andrew Grossman
WASHINGTON-- Citigroup Inc. committed "egregious" misconduct by covering up problems with loans it was packaging
into securities and selling to investors, Attorney General Eric Holder is expected to say Monday when the Justice
Department announces a $7 billion settlement with the bank to resolve the government's mortgage probe.
"Despite the fact that Citigroup learned of serious and widespread defects among the increasingly risky loans they
were securitizing, the bank and its employees concealed these defects," Mr. Holder plans to say, according to a prepared
copy of his remarks.
Citigroup will pay an expected $4 billion fine to settle the probe--twice as much as the penalty paid by J.P.
Morgan to resolve a similar case, even though its role in the mortgage securities business was smaller. Justice
Department officials have said that reflects the high level of malfeasance committed by Citigroup. The rest of the
settlement will go to consumer relief, the Federal Deposit Insurance Corp. and the states of California, Delaware,
Illinois, Massachusetts and New York, according to people familiar with the matter.
Mr. Holder plans to say that the bank's misdeeds--which it admitted to "in great detail" as part of the settlement-
-allowed it to dupe investors and win market share. That, he said, hurt endowment and pension funds, municipalities and
In his prepared remarks, Mr. Holder noted the civil settlement doesn't rule out future criminal charges against
Citigroup or its employees. He hinted at the back-and-forth talks that led up the deal, which nearly ended with the
Justice Department suing the bank.
"We believe the size and scope of this resolution goes beyond what could be considered the mere cost of doing
business," Mr. Holder planned to say. "In fact, it was not at all inevitable in these last few weeks that this case
would be resolved out of court. But in all of its cases, the Justice Department is committed to delivering outcomes that
are commensurate with the misconduct at issue."
Write to Andrew Grossman at firstname.lastname@example.org
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