Citigroup paying $285M in fraud case

WASHINGTON -- Citigroup has agreed to pay $285 million to settle civil fraud charges that it misled buyers of a complex mortgage investment just as the housing market was starting to collapse.

The Securities and Exchange Commission said Wednesday the big Wall Street bank bet against the investment in 2007 and made $160 million in fees and profits. Investors lost millions. Citigroup neither admitted nor denied the SEC's allegations in the settlement.

"We are pleased to put this matter behind us and are focused on contributing to the economic recovery, serving our clients and growing responsibly," Citigroup, based on Park Avenue, said in a statement.

The penalty is the biggest involving a Wall Street firm accused of misleading investors before the financial crisis since Goldman Sachs & Co. paid $550 million to settle similar charges last year. JPMorgan Chase & Co. resolved similar charges in June and paid $153.6 million.

The SEC is under pressure to bring cases that hold Wall Street figures accountable for their role in the 2007-2009 financial crisis that triggered a deep recession.

Citigroup's payment includes the fees and profit it earned, plus $30 million in interest and a $95 million penalty. The money will be returned to investors, the SEC said.

In the July-September quarter Citigroup earned $3.8 billion. During the financial crisis Citigroup received $45 billion as part of the government's $700-billion bailout of financial institutions.

Combined wire services