The settlement is one of the largest arising from the 2007-2008 crisis. It resolves claims that Citigroup failed to take timely writedowns on the CDOs, many of which were backed by subprime mortgages, and that shareholders suffered billions of dollars of losses once the risks were realized.
Citigroup in a statement called the accord "a significant step toward resolving our exposure to claims arising from the period of the financial crisis." It said the $590 million is covered by existing litigation reserves.
The settlement covers Citigroup shareholders from Feb. 26, 2007, to April 18, 2008, according to papers filed Wednesday in Manhattan federal court, and requires approval by U.S. District Judge Sidney Stein.
"Although plaintiffs believe that the defendants knowingly or recklessly misrepresented Citigroup's CDO exposure and valuation, defendants have raised a host of factual and legal challenges, increasing the uncertainty of a favorable outcome absent settlement," lawyers for the shareholders said in settlement papers.
"The principal reason for the settlement is the significant benefit that it provides to the settlement class now," they added.
Stein also oversees bondholder and other litigation against Citigroup tied to the financial meltdown.
In afternoon trading, Citigroup shares were up 24 cents at $29.58.
The case is In re: Citigroup Inc Securities Litigation, U.S. District Court, Southern District of New York, No. 07-09901.
Original Article
Source: huffington post
Author: Reuters
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