Citigroup settles shareholder CDO lawsuit for $590 million

  • Citigroup is to pay $590 million to settle a shareholder lawsuit alleging it hid billions of dollars of toxic mortgage assets.

    The agreement resolves accusations that shareholders ended up with significant losses after the bank failed to take timely writedowns on collateralized debt obligations, many that were backed by subprime mortgages and dealt with self-dealing transactions that hid the risks.

    Citigroup said the accord was "a significant step toward resolving our exposure to claims arising from the period of the financial crisis," adding that the $590 million as covered by existing reserves.

    U.S. District Judge Sidney Stein in Manhattan has granted preliminary approval of the settlement. A hearing has been scheduled for January 15, 2013 to consider final approval.