By Brendan Pierson, from New York Law Journal

New York will get $182 million out of a $7 billion settlement between Citigroup Inc. and the federal government over the bank’s activity in the subprime mortgage market, which was announced Monday.

The settlement came out of an investigation led by the U.S. Attorneys for the Eastern District of New York and the District of Colorado, as well as the Department of Justice’s Residential Mortgage-Backed Securities (RMBS) Working Group.

See Settlement Agreement and Statement of Facts.

Of the total settlement, $4 billion will be paid to the Department of Justice as a civil penalty and $500 million will be paid to state attorneys general and the Federal Deposit Insurance Corporation. The remaining $2.5 billion will provide relief to consumers, which will include relief for underwater homeowners and financing of low-income rental housing.

Of New York’s share, $92 million will be paid in cash and $90 million will go toward consumer relief, according to New York Attorney General Eric Schneiderman, who co-chairs the RMBS Working Group.

“This settlement will build upon our work bringing relief to homeowners around the country and across New York, and is exactly what our working group was created to do,” Schneiderman said in a news release. “Systemic frauds harmed thousands of New York homeowners and investors, and today’s result is a major victory in the fight to hold those who caused the financial crisis accountable.”

The settlement does not release Citigroup officers from potential criminal liability.

Eastern District U.S. Attorney Loretta Lynch, in a statement, said the investigation revealed “that the misconduct in Citigroup’s deals devastated the nation and the world’s economies, touching everyone.”

“The investors in Citigroup RMBS included federally-insured financial institutions, as well as a host of states, cities, public and union pension and benefit funds, universities, religious charities and hospitals, among others,” she continued. “These are our neighbors in Colorado, New York and around the country, hard-working people who saved and put away for retirement, only to see their savings decimated.”

The Eastern District assistant U.S. attorneys involved in the investigation are Richard Hayes, John Vagelatos and Edward Newman.

Citigroup is represented by Brad Karp, Theodore Wells, Bruce Birenboim and Susanna Buergel, partners at Paul, Weiss, Rifkind, Wharton & Garrison, along with associates Kevin O’Keefe, Jesse Crew, Ryan Goldstein and Caitlin Grusauskas.

Citigroup CEO Michael Corbat said in a news release that the settlement ends all pending civil investigations related to its handling of mortgage-backed securities.

“We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not the past,” he stated.

The two sides once had been far apart in their negotiations. The Justice Department had warned last month that it would sue after the bank offered to pay less than $4 billion to resolve the matter—substantially less than what the government was seeking.

IMAGE: U.S. Attorney General Eric Holder, center, announces Monday Citigroup will pay $7 billion to settle an investigation into risky subprime mortgages. With Holder, are, from left, Tony West, the lead Justice Department negotiator in the Citigroup case; John Walsh, U.S. Attorney for the District of Colorado and Loretta E. Lynch, U.S. Attorney for the Eastern District of New York.

AP/Pablo Martinez Monsivais

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