New York Attorney General Andrew Cuomo on Friday said he is prepared to charge Citigroup Inc with fraudulent sales of auction-rate securities, and with the destruction of key documents.
He joins the Securities and Exchange Commission (SEC) and other regulators who have subpoenaed information from the bank about the sale of its auction rate securities.
They believe that the money market-like investments were being aggressively marketed despite a rapid weakening in trading.
Auction-rate securities have their interest rates set at periodic auctions, depending on the submitted bids.
The investments were once considered safe, but the market collapsed in February amid turmoil in the credit markets.
Citigroup, the largest US banking company by assets, is the latest bank to disclose that regulators are seeking information on its sales of auction-rate securities. In May, Wachovia Corp disclosed that it, too, has received requests from the SEC about auction-rate securities sales.
New York sued UBS AG on July 24 over the same matter, and states like Massachusetts and Texas have filed similar complaints.
All of them accuse the Swiss bank of fraudulently promoting tens of billions of dollars of auction-rate securities as safe when it knew a crisis was brewing.
In a letter to Citigroup’s counsel, Cuomo says a settlement is possible if Citigroup meets several requirements including buying back the securities from retail investors and reimbursing them for damages.
Citigroup didn’t immediately respond to a request for comment.
Shares of the bank rose US$0.18 to close at US$18.87.
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