CitiGroup Expand its Plans by 7 Billion$ in Settlements

Citigroup and the Justice Department have agreed to a $7 billion deal that will settle a federal investigation into the mortgage securities the bank sold in the run-up to the financial crisis, Michael Corkery writes in DealBook. The deal, announced on Monday morning, includes a $4 billion cash penalty to the Justice Department ‒ the largest payment of its kind ‒ as well as $2.5 billion in so-called soft dollars earmarked for aiding struggling consumers and $500 million to state attorneys general and the Federal Deposit Insurance Corporation. The bank, which is scheduled to announce second-quarter earnings at 8 a.m., said the settlement would result in a pretax charge of $3.8 billion before taxes in the period.
The deal caps months of contentious talks that began with a $363 million offer by Citigroup followed by a $12 billion demand from the Justice Department, a gap that stemmed from the radically divergent methods used to calculate the cost of the settlement, DealBook’s Ben Protess, Jessica Silver-Greenberg and Michael Corkery write. Citigroup linked its initial offer to the bank’s relatively small share of the market for mortgage securities. But the Justice Department rejected that argument, emphasizing instead what it saw as Citigroup’s level of culpability based on incriminating emails and other evidence it had uncovered.
The Irish drug maker Shire said on Monday that its board was prepared to recommend an improved takeover bid of 53.20 pounds a share, the equivalent of about $53 billion, that it received over the weekend from AbbVie, Chad Bray writes in DealBook. The latest offer is the fifth revised bid by AbbVie, which is based in Chicago.

The deal, if completed, would allow AbbVie to reincorporate in Britain and save millions of dollars in taxes, a process known as an inversion. Shire has its headquarters in Ireland and is listed in London. AbbVie is hoping to reach a deal for Shire before July 18, when it will have to make a firm offer or walk away for up to six months under British takeover rules.

Mario Draghi, the president of the European Central Bank, testifies on economic and monetary development before the European Parliament’s Committee on Economic and Monetary Affairs at 1:30 p.m. in Strasbourg, France. Happy Bastille Day.

The debt settlement industry, already accused of questionable tactics related to mortgages, has found a gold mine of new customers: those with student debt, Rachel Abrams and Jessica Silver-Greenberg write in DealBook. Federal and state regulators are now finding new instances of abuse as these debt settlement companies shift from mortgage and credit card debt to student loans.

On Monday, Illinois is expected to become the first state to bring legal action against debt settlement companies in connection with their student loan practices, contending in two separate lawsuits that Broadsword Student Advantage and First American Tax Defense duped vulnerable borrowers into paying for help that never arrived. The companies often misled customers about fees, according to the suits, and in some instances feigned affiliation with federal relief programs. In some cases, the Illinois attorney general contends, the companies charged customers for debt assistance that they could have received free from the Education Department.