U.S. preparing civil charges against Citigroup, Merrill Lynch: sources
By Aruna Viswanatha and Emily Flitter
(Reuters) - The 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. Continued...