Government preparing to sue Citi for fraud -- report

by Ryan Smith16 Jun 2014
The Justice Department is reportedly preparing to sue Citigroup for fraud.

Citing anonymous sources, Reuters reported that the government is preparing to sue the bank on charges that it defrauded investors on billions of dollars in mortgage-backed securities shortly before the financial meltdown.

Talks between the government and Citigroup, which reportedly involved settlement numbers of $10 billion or more, have broken down, Reuters reported. While the Justice Department had demanded $10 billion to settle the fraud probe, the bank reportedly offered less than $4 billion.

Many on Wall Street greeted the $10 billion figure with skepticism because Citigroup didn’t market as many mortgage-backed securities as other4 banks, Reuters reported. However, there’s no way for analysts to know if prosecutors have evidence that the bank was knowingly packaging shoddy securities and marketing them as safe. Prosecutors also consider how well an institution cooperates with investigations, Reuters reported.

The Justice Department is also preparing to file a similar lawsuit against Bank of America’s Merrill Lynch unit following the breakdown of talks over a $12 billion to $17 billion settlement, according to Reuters.
 

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