Another chapter of the Great Recession comes to a close as another financial giant has to pay a huge settlement related to unsavory business practices. A judge approved an offer from Citigroup Inc. (C) to settle claims they hid tens of billions of dollars in toxic assets from investors. The settlement covered investors who bought into the company between February 2007 and April 2008.
Citigroup got burned badly in the subprime mortgage collapse, writing off $17 billion in losses in the fourth quarter of 2007 alone. But while they saw the losses coming, plaintiff’s lawyers argued the bank intentionally obfuscated the coming collapse, and were disingenuous in their presentation of the health of the company.
A spokeswoman from the bank, Shannon Bell, said simply “Citi is pleased to put the matter behind us.” This statement echoes – almost exactly word for word – what a spokesperson for JP Morgan Chase & Co. (JPM) said on July 29 when that company was forced to pay out a $410 million settlement after being accused of engineering a massive power price fixing scheme.
The settlement was less than what plaintiffs had been seeking. Lawyers for the plaintiff will receive $73.6 million instead of the $100 million they had been seeking. The judge accused the plaintiff’s lawyers of engaging in gross overbilling, waste, and inefficiency
The settlement is a drop in the bucket of the total cost of the late aughts’ financial crisis. According to the Dallas Federal Reserve, the Great Recession cost the US economy $11.7 trillion.
Despite the settlement, Citigroup remains a highly profitable, $160.75 billion market cap company that easily beat its second quarter 2013 earnings expectations. Since dropping as low as $2.80 in January 2009, the stock has regained a considerable amount of its value, although it is still nowhere near its highs just prior to the collapse.
Citigroup was unfazed by the settlement news, and is up 1.43 percent to hit $52.88 a share. They’re up 26.40 percent on the year.