SEC Widens CDO Probe, Pursues Settlement With Citigroup: Report

The U.S. securities regulator is widening its probe into mortgage-bond deals that ushered in the financial crisis, and is pushing for a settlement of more than $200 million with Citigroup, the Wall Street Journal said, citing people familiar with the matter.

The Securities and Exchange Commission officials are in advanced talks with Citigroup to settle civil charges related to a $1 billion mortgage-bond deal called Class V Funding III, the Journal said.

The SEC is especially looking into whether investors in some deals were properly warned that firms betting against the housing market had a role in choosing what mortgage-linked assets went into the deals, the people told the paper.

The agency is also negotiating a parallel settlement with Credit Suisse, which acted as collateral manager on the deal, the Journal said.

However, the Swiss bank likely would not face any charges related to the collateralized debt obligations (CDOs) it created and marketed, a person told the Journal.

SEC spokesman John Nester declined to comment to Reuters on the Journal report. Citigroup and Credit Suisse declined to comment to the Journal.

The regulators are also examining whether investors were misled in deals created by Japanese bank Mizuho Financial Group Inc, the Journal said.

The SEC's inquiry into Mizuho still is months from completion and might not result in charges being filed against the company, according to the paper.

The companies could not immediately be reached by Reuters for comment outside regular U.S. business hours.

In a similar case involving a CDO, Squared CDO 2007-1, JPMorgan paid $153.6 million to settle with the SEC in June.

Goldman Sachs Group Inc last year paid $550 million to settle a similar SEC case over another CDO, Abacus.

A CDO is a type of derivative product whose value and payments are derived from an underlying portfolio, often bonds or mortgages.

(Reporting by Sakthi Prasad in Bangalore; Editing by Vinu Pilakkott)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Betsy Hayes175]

04:13 AM on 09/17/2011

By keeping those in the positive and making sure to not fall behind, you are maintaining the good marks on your credit report. http://bit.ly/pod6EL

[jantomnidrah]

10:26 AM on 09/16/2011

HOW COME THERE IS NOTHING IN HUFFYPO ABOUT THE HALF BILLION DOLLAR SOLYNDRA GIVE AWAY BY OBAMA?? THAT IS THE BIG NEWS ON THE GOOD MEDIA AND YOU HUFFYPO GUYS ARE HIDING IT?? HOW COME

[parrotfish]

09:37 PM on 09/15/2011

They can widen the probe all they want...the bottom line is it is almost the end of 2011 and the financial fraud occured in 2007/2008 and No CEO/President/Vice President/Managing Director or Board of Directors of the financial companies involved in the fraud have gone to jail....

So yawn! to this "widening" probe....come back when someone at the highest level has gone to jail for a long, long time and the wealth taken away from them that they and their families accumulated by fraudulent means and were living large while millions are out of work, under-employed, losing homes and in poverty.

[mkdewboohoohoo]

03:36 PM on 09/15/2011

What the hell is wrong with our govenment? We don't need another settlement. We need to prosecute these people and put them in jail!

[rMatey]

02:27 PM on 09/15/2011

Its just too bad that they think the guillotine is cruel and unusual punishment.

[greyhound2]

07:08 PM on 09/15/2011

The machine was developed by a French doctor of the same name as a quick and efficient method of removing heads, rather than the messy hacking at them several times with a blunt axe.

[marignymitch]

02:22 PM on 09/15/2011

It's the best of times to be an war criminal or bankster. Perps these days needn't worry about incarceration.

[Don Glenn]

12:38 PM on 09/15/2011

And the republicans want to turn back wall street reform. The sad part of the matter is the republican supporters "Can'T Handle The Truth"

[Dean Pryer]

11:59 AM on 09/15/2011

The SEC has absolutely no credibility regarding its "probes."

[cats530]

11:34 AM on 09/15/2011

One question: How is the SEC "widening the probe", when the SEC has admitted to shredding important evidence? Smells like more whitewash BS from the SEC; a fake investigation followed by whitewash slap-on-the-wrist "fines". All is well in the white collar world of crime.

[marignymitch]

02:27 PM on 09/15/2011

Some animals are more equal than others.

[mnyegele]

10:22 AM on 09/15/2011

Suffice it to say, when the GOP wins in 2012, they will shut down the SEC. People who invest in Wall Street will lose every penny they lose, except for the smart insiders with the inside scoop. The GOP wants the rich to get away scot free from all the crimes they commit.

[Freethinkinggal]

10:50 AM on 09/15/2011

Oh stop being such a partisan hack. Both parties are responsible and the SEC was asleep at the wheel.

[fried]

11:16 PM on 09/15/2011

Asleep a the wheel, try, looking the other way. And last I heard there 's only one party running there campaign on more deregulation.

[marignymitch]

02:23 PM on 09/15/2011

Obama is on board!

[basman1234]

10:22 AM on 09/15/2011

Given the state of our economy, and the crash associated with the "paper" selling, WHY is it taking so long to finally look into this? This crash isn't something that happened last week. We have the highest poverty rate since the great depression, yet these people on Wall st are making record bonuses for lying - and essentailly stealing. Can ANYONE explain that? The tax payers bailed-out the banks and now the very financial CORPORATIONS we rescued for being so greedy and irresponsible won't lend money. In the meantime the executives who did this spend weekends in the Hamptons. Think they give a darn about some family in Ohio or Alabama that can't feed the kids as a result of what they did? No! They should ALL go to jail with Bernie Madoff. White collar crooks.

[fineartgalaxy]

10:20 AM on 09/15/2011

We do not want settlements. We want prosecution and restitution. We want criminal charges.

[cats530]

11:36 AM on 09/15/2011

Would you mind if I squeezed in, "incarceration" between prosecution and restitution?

[fineartgalaxy]

10:18 AM on 09/15/2011

We need some good financial and fiscal PR. Prosecution of and Restitution by every single entity which had a hand in killing America's homes and jobs. Anything shorter than that we will take but it is not enough. Not enough.

[antipodal2u]

10:03 AM on 09/15/2011

SEC Widens CDO Probe, Pursues Settlement With Citigroup: Report

Nahnahnah no settlement for these crooks! Who gets the money? The people whove lost jobs, home, families? What about those whove commited suicide? Any justice for them? ALL responsible for this fiasco goes directly to jail. We have plenty of space at the madoff inn! O wait, thats right. The people who own these prisons are the ones responsible. How silly of me

[SamKnause]

09:59 AM on 09/15/2011

Is the definition for widening the probe tossing more documents pertaining to investigations ???

The SEC is aiding and abetting, not investigating.

P.S. The documents involved in the investigation of Enron were housed in building 7 of the WTC.

The third skyscraper that 'collapsed' on nine/eleven.

The day before nine/eleven Donald Rumsfeld held a press conference. He announced that the Pentagon could not account for 2.3 TRILLION dollars.

U.S. citizens are being robbed blind by the very people who are suppose to protect them.