Washington - As the housing market began its collapse, the Wall Street firms and sophisticated investors looked for ways to profit. Some of them found an easy way: with a portfolio of orders linked to risky mortgage investments, sell it to unsuspecting customers and bet against it.
Citigroup on Wednesday agreed to pay $ 285 million to settle a civil complaint by the Securities and Exchange Commission that he had defrauded investors who bought such an agreement. The transaction involved a portfolio of $ 1 billion of mortgage-related investments, many of which were carefully selected for the portfolio by Citigroup without telling investors or that its role had made Paris the investment would fall in value.
In the four years since the housing market began its descent regular securities regulators have settled only two cases related to the financial crisis for more money. It is also the third case brought by the SEC accused a major Wall Street institution of misleading customers about who was to bring together security and their motivations. Goldman Sachs and JPMorgan Chase & Company Once installed similar case last year.
The settlement reimburse investors with interest and include a $ 95 million fine - a relative pittance for a giant like Citigroup. Monday, the company said that in the third quarter alone it made profits of $ 3.8 billion on revenues of $ 20.8 billion. The law may also have the approval of the difficulty in obtaining Jed S. Rakoff, the federal district judge in New York who must ultimately sign on the fine and took a hard line on the SEC settlements.
Neither the SEC nor the Department of Justice would say if the case raises questions about whether Citigroup had been involved in any criminal act. But the case highlights a growing frustration felt by the owners before, investors and Wall Street look like protesters that few, if any, of senior bank executives have faced criminal charges for losses caused by the financial crisis.
Citigroup settled a case stemming from the crisis. Last year, it agreed to pay $ 75 million to settle federal claims that the concealed interests of investors majority of subprime investments that have been a loss in value during the crisis and that eventually led the government Federal to save the bank.
"The securities laws require that investors receive more care and honesty that Citigroup provided" investors in security, said Robert Khuzam, director of the enforcement division of the SEC, referring to action Wednesday. "Investors were not informed that Citigroup had decided to bet against them and helped choose the assets that would determine who won or lost."
The fusion complex investments known as Class V Funding III produces 126 million dollars in profits for the brokerage subsidiary of Citigroup, and $ 34 million in fees to bring them together. All this, including interest and $ 95 million end, will now return to investors and the government will receive nothing.
In a statement, Citigroup noted that the S. EC does not load it with "willful or reckless." Instead, it settled charges that its actions were negligent and misleading to investors. In spite of its profits on the current agreement, the entire Citigroup has lost tens of billions of dollars of assets related to mortgage investments.
"We are pleased to put this matter behind us and focus on the contribution to economic recovery, to serve our customers and become more responsible," the company said in a statement. "Since the crisis, we have strengthened our financial strength, based on the revised risk management, a significantly reduced risk on the balance sheet and return to the basics of the bank."
The SEC on Wednesday also filed suit against Credit Suisse, who played a small role in the transaction, and against an individual at each company. But these people were middle-level employees in each company's investment and commercial departments, not senior management or the company have been charged.
Citigroup on Wednesday agreed to pay $ 285 million to settle a civil complaint by the Securities and Exchange Commission that he had defrauded investors who bought such an agreement. The transaction involved a portfolio of $ 1 billion of mortgage-related investments, many of which were carefully selected for the portfolio by Citigroup without telling investors or that its role had made Paris the investment would fall in value.
In the four years since the housing market began its descent regular securities regulators have settled only two cases related to the financial crisis for more money. It is also the third case brought by the SEC accused a major Wall Street institution of misleading customers about who was to bring together security and their motivations. Goldman Sachs and JPMorgan Chase & Company Once installed similar case last year.
The settlement reimburse investors with interest and include a $ 95 million fine - a relative pittance for a giant like Citigroup. Monday, the company said that in the third quarter alone it made profits of $ 3.8 billion on revenues of $ 20.8 billion. The law may also have the approval of the difficulty in obtaining Jed S. Rakoff, the federal district judge in New York who must ultimately sign on the fine and took a hard line on the SEC settlements.
Neither the SEC nor the Department of Justice would say if the case raises questions about whether Citigroup had been involved in any criminal act. But the case highlights a growing frustration felt by the owners before, investors and Wall Street look like protesters that few, if any, of senior bank executives have faced criminal charges for losses caused by the financial crisis.
Citigroup settled a case stemming from the crisis. Last year, it agreed to pay $ 75 million to settle federal claims that the concealed interests of investors majority of subprime investments that have been a loss in value during the crisis and that eventually led the government Federal to save the bank.
"The securities laws require that investors receive more care and honesty that Citigroup provided" investors in security, said Robert Khuzam, director of the enforcement division of the SEC, referring to action Wednesday. "Investors were not informed that Citigroup had decided to bet against them and helped choose the assets that would determine who won or lost."
The fusion complex investments known as Class V Funding III produces 126 million dollars in profits for the brokerage subsidiary of Citigroup, and $ 34 million in fees to bring them together. All this, including interest and $ 95 million end, will now return to investors and the government will receive nothing.
In a statement, Citigroup noted that the S. EC does not load it with "willful or reckless." Instead, it settled charges that its actions were negligent and misleading to investors. In spite of its profits on the current agreement, the entire Citigroup has lost tens of billions of dollars of assets related to mortgage investments.
"We are pleased to put this matter behind us and focus on the contribution to economic recovery, to serve our customers and become more responsible," the company said in a statement. "Since the crisis, we have strengthened our financial strength, based on the revised risk management, a significantly reduced risk on the balance sheet and return to the basics of the bank."
The SEC on Wednesday also filed suit against Credit Suisse, who played a small role in the transaction, and against an individual at each company. But these people were middle-level employees in each company's investment and commercial departments, not senior management or the company have been charged.
