News / Economy

US Preparing Civil Charges Against Citigroup, Merrill Lynch

FILE - A Citi Bank sign in Chicago.
FILE - A Citi Bank sign in Chicago.
Reuters
The U.S. Justice Department is preparing to file civil fraud charges against Citigroup Inc and Bank of America's Merrill Lynch unit over their sale of flawed mortgage securities ahead of the financial crisis, according to people familiar with the probes.

Civil investigators have compiled evidence that allegedly shows that investors lost tens of billions of dollars after purchasing securities Citigroup had marketed as safe even though the bank had reason to believe otherwise, one person said.

An investigation into the mortgage securities marketed by Merrill Lynch, which Bank of America agreed to acquire at the height of the crisis in 2008, is also close to completion, two other people said.

Probes against Royal Bank of Scotland and Credit Suisse are also underway and progressing, according to another two people familiar with those cases.

Representatives for all four banks declined to comment.

The U.S. banking industry, which faces a range of mortgage-related lawsuits, has contended that many of the alleged investor losses can be attributed to the financial crisis, and that they should not be held liable for marketing a variety of mortgage securities that ultimately soured.

The Justice Department has not determined the exact timing of upcoming lawsuits, the sources said, although U.S. Attorney General Eric Holder told Reuters earlier this month that the department planned to bring more mortgage-related cases in early 2014, while declining to name which companies were targeted.

The probes could also lead to settlements instead of lawsuits.

The cases stem from a government task force the Obama administration created in early 2012 to probe the sale of shoddy home loans repackaged for investors.

Last month, JPMorgan Chase entered a $13 billion settlement with the Justice Department and other agencies, to resolve charges that the bank overstated the quality of mortgages it was selling to investors.

The Department of Justice trumpeted that settlement as a big step toward holding banks accountable for their behavior before the financial crisis, and authorities have dedicated dozens of investigators to bringing similar lawsuits against other major Wall Street firms.

A representative from the Justice Department declined to comment.

Goldman Sachs has also disclosed it is under investigation and that future claims from the task force could result in a “significant increase” in the company's liabilities.

While the investigation against Citigroup is the furthest along, disagreements about where that case might be filed could potentially push Merrill Lynch ahead, said one person familiar with the matter.

Lawyers at the U.S. Attorney's offices in Brooklyn and in Colorado are both investigating Citigroup, and both want the high-profile case to be filed in their district, this person said. Officials are expected to meet this week to try to resolve the dispute, the source said.

Representatives from the U.S. Attorney's offices in Colorado and Brooklyn declined comment. A spokeswoman for the U.S. Attorney's office in New Jersey, which is investigating Merrill Lynch, also declined comment.

Royal Bank of Scotland is also under investigation and could face charges as early as the first half of 2014, sources said.

The Justice Department has also recently received further evidence, including internal communication records, regarding the mortgage activities of Swiss bank Credit Suisse, according to one person familiar with that case.

The source said the evidence shows Credit Suisse's mortgage lending arm ignored red flags about its processes for signing off on loans and pushed to increase the output of them for the bank to bundle into securities. It is unclear how advanced that overall investigation is.

You May Like

ASEAN Ministers Set to Push for South China Sea Agreements

According to documents obtained by VOA Khmer, ministers will stand up for 'freedom of navigation, unimpeded lawful maritime commerce, trade and over flight' More

Puerto Rico Defaults on $58M Debt Payment

Payment was due Saturday, default is first in country's 117 years as a United States possession More

Turkish Public Fears Jihadists More Than Kurds

Turkey facing twin threats of terrorism by Islamic State and PKK Kurdish separatists, says President Erdogan’s ruling AK Party More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Iraqi Yazidis Fear Death of Their Communityi
X
Sharon Behn
August 03, 2015 2:23 PM
A year ago on August 3, Islamic State militants stormed the homelands of Iraq’s Yazidi minority, killing hundreds of men and enslaving thousands of women. The scenes of desperate Yazidi families crowding on the top of Sinjar mountain without food or water spurred Kurdish fighters into action, an emergency airlift and the start of the U.S. airstrike campaign against the Islamic State Sunni extremists. VOA's Sharon Benh reports from northern Iraq.
Video

Video Iraqi Yazidis Fear Death of Their Community

A year ago on August 3, Islamic State militants stormed the homelands of Iraq’s Yazidi minority, killing hundreds of men and enslaving thousands of women. The scenes of desperate Yazidi families crowding on the top of Sinjar mountain without food or water spurred Kurdish fighters into action, an emergency airlift and the start of the U.S. airstrike campaign against the Islamic State Sunni extremists. VOA's Sharon Benh reports from northern Iraq.
Video

Video Bangkok Warned It Soon Could Be Submerged

Italy's Venice and America's New Orleans are not the only cities gradually submerging. The nearly ten million residents of the Bangkok urban area now must confront warnings the city could become uninhabitable in a few decades. VOA Correspondent Steve Herman reports from the Thai capital.
Video

Video Inclusive Gym Gets People With Disabilities in Fitness Spirit

Individuals with special needs are 58 percent more likely to be obese than the general population. According to the U.S. Centers for Disease Control, they also have an increased likelihood of anxiety, depression and social isolation. But a sports club outside Washington wants to make a difference in these people's lives. With Carol Pearson narrating, VOA's June Soh reports.
Video

Video Astronauts Train Underwater for Deep Space Missions

Manned deep space missions are still a long way off, but space agencies are already testing procedures, equipment and human stamina for operations in extreme environment conditions. Small groups of astronauts take turns in spending days in an underwater lab, off Florida’s southern coast, simulating future missions to some remote world. VOA’s George Putic reports.
Video

Video Special Olympics Show Competitors' Skill, Determination

Special Olympics competitions will wrap up Saturday in Los Angeles, and the closing ceremony for athletes with intellectual disabilities will be held Sunday night. In a week of competition, athletes have shown what they can do through skill and determination. VOA's Mike O'Sullivan reports.
Video

Video Civil Rights Leaders Struggled to Achieve Voting Rights Act

Fifty years ago, lawmakers approved, and U.S. President Lyndon Johnson signed, the Voting Rights Act of 1965. The measure outlawed racial discrimination in voting, giving millions of blacks in many parts of the southern United States federal enforcement of the right to vote. Correspondent Chris Simkins introduces us to some civil rights leaders who were on the front lines in the struggle for voting rights.
Video

Video Shooter’s Grill: Serving Food with a Touch of the Second Amendment

Shooter's Grill, a restaurant in Rifle, Colorado, attracts visitors from all over the world as well as local patrons. The reason? Waitresses openly carry loaded firearms as they serve food, and customers are welcome to carry them, too. VOA's Enming Liu and Lin Yang paid a visit to Shooter's Grill, and heard different opinions about this unique establishment.
Video

Video Despite Controversy, Business Owner Continues Sale of Confederate Flags

At Cooter’s, a store in rural Sperryville, Virginia, about 120 kilometers west of Washington, D.C., Confederate flags are flying off the shelves. The red, white and blue battle flag, with 13 white stars representing the Confederate states, was carried by southern forces during the U.S. Civil War in the 1860s. The South had seceded from the Union over several key issues of disagreement, including slavery. VOA’s Deborah Block has the story.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.

VOA Blogs

World Currencies

EUR
USD
0.9118
JPY
USD
124.31
GBP
USD
0.6420
CAD
USD
1.3048
INR
USD
64.136

Rates may not be current.