Aldrich Law Firm, Ltd.
Aldrich Law Firm, Ltd.

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Bank settles investors’ class-action suit for $730 million

In some situations, a Nevada business may decide to settle major litigation against it rather than go to trial, even if the business is confident that it is in the right. Even if a business believes it would prevail in court, the potential expense of continuing the litigation could make that a less-than-great business decision. That is what Citigroup is saying is the reasoning behind its decision to settle a class-action lawsuit for $730 million on March 18.

The litigation was brought by a group of investors who purchased mortgage loans and preferred stock from Citigroup between 2006 and 2008. The plaintiffs claimed that Citibank’s disclosures about the investments contained misstatements and omissions. Among other things, the mortgages were described as high credit quality, but were actually risky investments, the lawsuit contended. Many of the investors apparently suffered financial losses during the mortgage crisis. The case has been pending for more than four years.

Despite the high-priced settlement, Citigroup continues to deny any wrongdoing. The bank says that it simply wanted to end the litigation as part of a larger strategy of “resolving our exposure” to lawsuits related to the 2008 financial crisis. The bank said that the $730 million would be paid out of money reserved for litigation.

The proposed settlement will have to be reviewed and approved by the judge presiding over the case. While courts sometimes reject settlements of this type, with both parties apparently in agreement it is likely that this will end the litigation as Citigroup hopes.

Source: The New York Times, “Citigroup Agrees to Settle Class-Action Lawsuit,” March 18, 2013

John P. Aldrich
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