Citigroup Agrees To Settle SEC's Fraud Charges

Copyright © 2011 National Public Radio®. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

RENEE MONTAGNE, HOST:

Citigroup is paying $285 million to end a federal lawsuit. That suit charged the bank misled investors who bought mortgage-related products back in 2007. Citi is the latest Wall Street institution to settle with prosecutors over practices that contributed to the financial crisis. From member station WNYC in New York, Ilya Marritz reports.

ILYA MARRITZBYLINE: The Securities and Exchange Commission says Citigroup deceived some customers when it marketed a particular collateralized debt obligation, or CDO. Citi told clients the CDO was safe and that its contents had been selected by an outside advisor. But it didn't tell them some of the bonds had been picked by Citigroup itself in the expectation they'd go sour. SEC director of enforcement Robert Khuzami...

ROBERT KHUZAMI: In effect, Citi bet that CDO assets would fail, but never told investors that it had taken this short position.

MARRITZBYLINE: When the bonds went bad, Citigroup made at least $126 million, and investors lost their money. University of Denver Law Professor Jay Brown says this case looks a lot like another lawsuit the SEC brought against Goldman Sachs last year. In recent months, the Commission has filed 22 separate cases against 81 individuals and companies relating to the financial crisis.

JAY BROWN: I think you see the SEC as being, you know, what has to be described as the primary cop, you know, that's going out and policing the behavior that at least contributed to the financial crisis.

MARRITZBYLINE: In a statement, Citigroup said, quote, "We are pleased to put this matter behind us and are focused on contributing to the economic recovery." The bank is neither admitting nor denying the charges. For NPR News, I'm Ilya Marritz in New York.

Copyright © 2011 National Public Radio®. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to National Public Radio. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.