CHICAGO (Legal Newsline) - Illinois Attorney General Lisa Madigan announced an $84 million settlement on Monday with Citigroup to resolve allegations it engaged in misconduct when it marketed and sold risky residential mortgage-backed securities (RMBS).
The agreement is part of a $7 billion federal and multi-state settlement that was joined by attorneys general from New York, Massachusetts, Delaware and California. The settlement recovers $44 million in relief for Illinois' pension systems and $40 million in consumer relief.
"This relief will fully restore the losses Illinois' pension systems incurred as a result of Citigroup's fraudulent schemes in the mortgage-backed securities market, and it will provide much-needed aid to Illinois homeowners who are still paying for Wall Street's reckless actions," Madigan said. "This settlement is the latest in my ongoing commitment to recover critical funds not only for homeowners but also for the state as we continue to address Illinois' financial crisis."
Madigan alleged that between 2006 and 2007, Citigroup failed to disclose the true risk of RMBS investments to Illinois' pension systems and misled the systems when they invested in the RMBS marketing prior to the 2008 economic collapse.
Under the terms of the agreement, Citigroup will pay $44 million to the Illinois Teachers Retirement System, the State Universities Retirement System and the Illinois State Board of Investment. The Illinois State Board of Investment oversees the Judges' Retirement System, General Assembly Retirement System and the State Employees' Retirement System. Citigroup will also pay $40 million in consumer relief, which includes assistance for renters and homeowners and funding for blight reduction.
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