Judge to approve $75M Citigroup settlement once bank adds assurances against future actions

Judge ready to approve $75M Citigroup settlement

WASHINGTON — A federal judge said Friday that she plans to approve the government’s $75 million settlement with Citigroup Inc. over charges it misled investors about billions in potential losses from subprime mortgages.

U.S. District Court Judge Ellen Segal Huvelle said she first wants assurances that Citigroup will maintain new policies it adopted to ensure it will avoid such violations in the future. Citigroup and the Securities and Exchange Commission, which brought the charges, agreed to add such assurances to the settlement.

The SEC had accused Citigroup of making misleading statements about its holdings tied to high-risk mortgages. Citigroup had said it was $13 billion or less; the SEC said it exceeded $50 billion.

Huvelle had initially declined in August to approve the deal. She questioned why shareholders should be punished for the alleged misconduct of the bank’s executives.

On Friday, she said she could approve the settlement in a few weeks, once the assurances are added.

The SEC attorneys said the five-member commission would have to approve the proposed changes.

The $75 million that Citigroup is paying represents less than 0.3 percent of its $22.07 billion in revenue in the second quarter of this year.

The SEC and Citigroup agreed that the money will be distributed to shareholders who were harmed by the alleged violations — but not to any Citigroup executives or directors who were in place at the time in 2007. Nearly all of Citigroup’s top executives left the bank after the financial crisis.

Former Chief Financial Officer Gary Crittenden settled related charges with the SEC by agreeing to pay a $100,000 civil penalty. The former head of investor relations, Arthur Tildesley Jr., agreed to pay $80,000. Tildesley now is the head of cross marketing at Citigroup.

Citigroup’s current top 25 executives, excluding CEO Vikram Pandit, are getting multimillion-dollar salary raises in stock and potentially much more in bonuses, the bank announced in a news release Friday.

Citigroup, one of the hardest-hit banks during the financial crisis, received $45 billion from the government’s $700 billion financial bailout — among the largest rescues. Citigroup repaid $20 billion of the federal bailout aid in December. The other $25 billion was converted to a government ownership stake in the company, which the government has said it will sell by the end of this year.