is in the early stages of talks with the
Securities and Exchange Commission
to settle an investigation into whether it misled investors by not properly disclosing the amount of troubled, or "subprime" mortgage assets it held as the market began to implode in 2007, the
Wall Street Journal
Citing people familiar with the matter, the
reports that one issue being debated inside the SEC is whether, as a recipient of bailout funds from the government, Citigroup should pay a large penalty in the case. Citigroup has received $45 billion from the U.S. government and plans to raise $5.5 billion more in capital from private investors.
A Citigroup spokesman told the newspaper it's not company policy to comment on such regulatory matters.
reports the settlement talks stem from an investigation that the SEC began in 2007 following the bank's third-quarter earnings. On Oct. 1, 2007, Citigroup unveiled a preliminary projection, two weeks before it formally reported earnings, that forecasted a 60% decline, based partly on a $1.3 billion loss on the value of assets tied to "subprime" mortgages and leveraged loans. Subsequent disclosures from the bank put the losses on its subprime-mortgage exposure much higher. On Nov. 4, 2007, Citigroup said that it faced new fourth-quarter losses of $8 billion to $11 billion on its subprime-mortgage exposure, the newspaper notes.
The bank also disclosed for the first time that it held U.S. subprime-mortgage assets totaling $55 billion -- including $43 billion that hadn't been highlighted earlier, according to the
It isn't clear what civil charges, if any, the SEC would bring against Citigroup, the