Citigroup defends USD 75 mn settlement with SEC: Report

Citi said the USD 75 million fine it agreed to pay under the settlement deal was appropriate, because the SEC's case didn't involve allegations of mismanaging assets or misvaluing them, The Wall Street Journal reported, citing court papers filed on Monday.

According to the SEC, Citi had said its exposure to subprime securities was only about USD 13 billion between July and mid-October, 2007, when the actual exposure was more than USD 52 billion. The SEC sued Citi and two executives for failing to disclose nearly USD 39 billion in subprime mortgage assets during 2007. The executives separately settled the matter by paying fines of less than USD 100,000, without admitting or denying wrong-doing.

Last month US District Judge Ellen Segal Huvelle asked both sides to explain why she should approve the deal. She questioned the penalty, noting that it would come from current shareholders' pockets, and the decision to single out two individuals. The SEC has already offered its defence of the deal and a hearing has been set for next week, the report noted.

Citi said it disagreed with the SEC's decision to sue and initially fought paying a penalty, but it urged the judge to give "substantial deference" to the SEC's decision and terms for settling the case, it added.

Citi was among the hardest-hit banks during the financial turmoil and received USD 45 billion out of the USD 700 billion bailout package released by the US government. As of December last year, the bank had repaid USD 20 billion of the bailout debt. The other USD 25 billion was converted into a government ownership stake in the company, which the government has said it will sell by the end of this year.