Citigroup Pays $75 Million To Settle Subprime Case : Planet Money The SEC says Citigroup misled investors into believing its subprime exposure was nearly $37 billion less than it truly was.
NPR logo Citigroup Pays $75 Million To Settle Subprime Case

Citigroup Pays $75 Million To Settle Subprime Case

Citigroup has agreed to pay the SEC $75 million to settle charges that the company misled investors about the amount of its subprime exposure. According to the complaint,

...Citigroup repeatedly made misleading statements in earnings calls and public filings about the extent of its holdings of assets backed by subprime mortgages. Between July and mid-October 2007, Citigroup represented that subprime exposure in its investment banking unit was $13 billion or less, when in fact it was more than $50 billion.

The SEC alleges that Citigroup misled investors by not mentioning two categories of subprime-backed assets: "'super senior' tranches of collateralized debt obligations (CDOs) and 'liquidity puts.'"

Here's what Robert Rubin, the former head of Citigroup’s executive committee, said about these "super senior" tranches of CDOs, when he testified before the FCIC in April.

I feel confident that the relevant personnel believed in good faith that more senior level consideration of these particular positions was unnecessary because the positions were AAA rated and appeared to bear minimal risk of default.

Citigroup agreed to the settlement "without admitting or denying the SEC's allegations." The company's former CFO and head of investor relations have also agreed to pay fines of $100,000, and $80,000, respectively.