Federal judge approves $590 million Citigroup investor lawsuit News
Federal judge approves $590 million Citigroup investor lawsuit
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[JURIST] A judge for the US District Court for the Southern District of New York [official website] on Thursday approved a settlement [opinion, PDF] wherein Citigroup [corporate website] will pay its investors over $590 million for misrepresenting its assets in securities linked to the sub-prime mortgage crisis [JURIST news archive]. The case reached a preliminary settlement in April [JURIST report], but Judge Sidney Stein refused to approve it because the requested counsel fees and costs were over $90 million. Four months later, the total fees requested were over $100 million, but the judge approved only $73.6 million in fees on Thursday. Stein reasoned that “Although the $590 million recovery is a fraction of the damages that might have been won at trial, it is substantial and reasonable in light of the risks faced if the action proceeded to trial.”

Citigroup’s shareholders filed [docket, PDF] this class action suit against the investment bank in 2007, in which they accused the company of making false or misleading statements regarding tens of billions of dollars of toxic mortgage assets. Citigroup filed a motion to dismiss in 2011 upon removal of the action to federal court, but Stein rejected [opinion, PDF] it. In the same month, Judge Jed Rakoff, sitting on the same court as Stein, blocked a proposal [JURIST report] by Citigroup to settle with the US Securities and Exchange Commission (SEC) [official website] for $285 million in another case because he said the SEC failed to set forth any facts as to what Citigroup did that was against the public interest, a decision appealed [notice of appeal, PDF] by the SEC. Rakoff had also rejected Citigroup’s initial settlement agreement of $75 million with the SEC a year earlier. Some critics have cautioned against the growing practice [JURIST op-ed] of judicial settlement blocking, warning that if defendants force the SEC to prove its allegations at trial as opposed to attempted settlement, the SEC might become more selective in bringing enforcement actions.