Citigroup to pay $590 million to settle CDO lawsuit

Citigroup yesterday agreed to pay $590 million to settle a shareholder lawsuit brought by investors alleging that the New York bank executives mislead them on its subprime mortgage-based security losses in 2007-2008.

The lawsuit, filed in November 2007, alleged that former top executives at the bank had ''concealed the company's failure to write down impaired securities containing subprime debt.''

Investors who bought Citigroup shares between February 2007 and April 2008 alleged that the bank did not disclose its exposure to the CDO market as a result they incurred heavy losses when the bank's share price plunged after the toxic assets became public.

Citigroup in 2007 sold securities to investors from a $1 billion mortgage that it believed would fail. It later bet against its customers and profited when the securities value declined.

Citigroup made $160 million from the deal, while investors lost $700 million.

Such mortgage securities frauds were made by a number of Wall Street's most profitable banks including Goldman Sachs, Bank of America and other hedge funds just before the onset of the global recession