N.Y. to move against Citi for ARS fraud

The office of New York attorney general Andrew Cuomo this afternoon announced plans to bring legal action against Citigroup Inc., accusing the bank of fraudulently selling auction rate securities and destroying documents that had been subpoenaed by the state, according to published reports.
Earlier today, a filing by Citigroup Inc. with the Securities and Exchange Commission showed that the regulator had subpoenaed information from the bank about its sale of auction rate securities.
Officials are investigating whether federal securities laws were violated during the sales of the securities, according to the New York-based financial services company.
Additionally, Citi is responding to subpoenas from agencies in various states, including New York, Texas and Massachusetts.
“Company, along with other industry participants, has received subpoenas and/or requests for information from various self-regulatory agencies and federal governmental authorities including the SEC,” Citigroup said in its quarterly report filed today with the regulator.
Additionally, Citigroup has been hit with several individual and class-action lawsuits related to the marketing, sale and underwriting of auction rate securities, which allege “violations of the federal securities laws, federal investment adviser laws and state common law,” according to the filing.
The market for auction-rate bonds, estimated at $234 billion to $330 billion, dried up during the winter, leaving investors unable to cash out of positions
Yesterday, the Massachusetts secretary of the commonwealth charged Merrill Lynch & Co. Inc. of New York with fraud related to the sale of auction rate securities.

Related Topics: Citigroup Inc.