Citigroup pays $75m to settle SEC sub-prime charges

In the lead-up to the financial crisis, Citigroup said it had $13bn of exposure to subprime mortgages in its investment banking unit, but that figure excluded ‘super-senior' tranches of collateralised debt obligations and liquidity puts, the SEC said. Combined, Citigroup's actual exposure was over $50bn.

Robert Khuzami, director of the SEC's division of enforcement said: "The rules of financial disclosure are simple - if you choose to speak, speak in full and not in half-truths."

Citigroup agreed to pay the $75m without admitting or denying guilt. Former chief financial officer Gary Crittenden agreed to pay $100,000 and former head of investor relations Arthur Tildesley, currently head of cross-marketing at Citigroup, agreed to pay $80,000.

In a statement, Citigroup said: "We are pleased that we have reached agreement with the SEC to put this matter concerning certain 2007 disclosures behind us, and that the SEC is not charging Citi or any individual with intentional or reckless misconduct."

"Citi continues to focus on contributing to the economic recovery and generating sustained profitability for the benefit of all its shareholders. Under CEO Vikram Pandit's leadership, we have bolstered our financial strength, overhauled our risk management, reduced our risk exposures, and made Citi a more focused enterprise by returning to banking as the core of our business."

This is the second large settlement this month for the SEC.

Earlier this month, Goldman Sachs agreed to pay $550m to settle charges of fraud related to mortgage-backed securities. The SEC claimed Goldman allowed hedge fund star John Paulson's Paulson & Co. to help put together a package of sub-prime mortgages to be sold to clients, but shorted by the manager. (Global Pensions; July 16, 2010)