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Citigroup pays biggest civil fraud penalty in DOJ deal

Citigroup Inc. will pay $7 billion to settle a U.S. investigation into shoddy mortgage-backed securities the bank sold as the country headed toward financial crisis, including the largest civil fraud penalty ever imposed by the U.S. Justice Department.

Signed over the weekend and announced Monday, the settlement  with the DOJ resolves federal and state civil claims related to Citi’s sale of toxic residential mortgage-backed securities (RMBS) before January 1, 2009.

Citigroup must pay $4.5 billion in cash to the DOJ and provide $2.5 billion in aid to low-income tenants and struggling homeowners.

The settlement does not absolve Citigroup or its employees from facing any possible criminal charges, the DOJ said.

“The penalty is appropriate, given the strength of the evidence of the wrongdoing committed by Citi,” U.S. Attorney General Eric Holder said Monday.

Citi acknowledged as part of the settlement that it made serious misrepresentations to the public about the mortgage loans it securitized.

Citi said on its website Monday that the settlement was in the best interest of its shareholders and the company can now focus on the future.

Citi also said Monday that quarterly earnings fell 96 percent, largely because of the settlement.


Julie DiMauro is the executive editor of FCPA Blog and can be reached here.

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