NEW YORK (Reuters) - A federal judge gave final approval Thursday to a $590 million settlement by Citigroup Inc that resolves a shareholder lawsuit accusing the bank of hiding tens of billions of dollars of toxic mortgage assets.
“Although the $590 million recovery is a fraction of the damages that might have been won at trial, it is substantial and reasonable in light of the risks faced if the action proceeded to trial,” U.S. District Judge Sidney Stein in Manhattan wrote in a 48-page opinion.
The settlement resolves claims by shareholders who purchased Citigroup shares from February 2007 to April 2008 that the New York-based bank misrepresented its exposure to securities known as collateralized debt obligations that were tied to mortgage investments.
Citigroup lost $27.68 billion in 2008. The lawsuit cited the plunge in the company’s stock price from $47.89 at the start of the fourth quarter of 2007 to $2.80 by January 2009.
The settlement was announced last August.
But Stein, who had previously questioned the fairness of the settlement, awarded substantially lower fees and expenses than what was sought by the plaintiffs’ lawyers.
The lead plaintiffs’ lawyers will receive $73.6 million instead of the $100.2 million they had requested.
While Stein said the lawyers “undoubtedly secured an impressive recovery” for Citigroup investors, their request was based on “significantly overstated” metrics.
Ira Press, a partner with Kirby McInerney who represents the investors, did not immediately respond to a request for comment.
“Citi is pleased to put this matter behind us,” Shannon Bell, a spokeswoman for the bank, said Thursday.
The case is In re: Citigroup Inc Securities Litigation, U.S. District Court, Southern District of New York, No. 07-09901.
Reporting by Nate Raymond; Editing by Leslie Adler