Citigroup has agreed to pay $75 million to settle federal claims that it failed to disclose vast holdings of subprime mortgage investments that crippled the bank during the financial crisis, according to two people briefed on the settlement.
In an unusual move, the Securities and Exchange Commission has also singled out two former Citigroup executives — Gary L. Crittenden, the former chief financial officer, and Arthur Tildesley, the former head of investor relations — for omitting material information in disclosures to shareholders, according to the two people briefed on the deal.
Mr. Crittenden has agreed to pay a $100,000 fine; Mr. Tildesley will pay $80,000.
The settlement, which was expected to be announced later on Thursday, centers on events in 2007 and 2008, when Citigroup’s reported losses abruptly cascaded, eventually prompting the federal government to rescue the bank. The case is the first to focus on whether banks adequately disclosed its increasingly precarious state of their finances.
As is customary in such settlements, Citigroup will nether admit nor deny the S.E.C. accusations, according to the two people briefed on the matter, who spoke on the condition they not be named because the settlement had not been announced.
For the last year, the S.E.C. has conducted a broad investigation into a variety of banking practices before and during the financial crisis. The Citigroup settlement follows the S.E.C.’s $550 million settlement with Goldman Sachs over claims that Goldman misled investors in a complex mortgage investment.
The Citigroup settlement differs from that one, since the S.E.C. is essentially claiming Citigroup misled its own shareholders, whereas it claimed Goldman misled its customers.
The gaping losses reported by Citigroup in 2007 and 2008 perplexed even banking analysts, many of whom were stunned to learn the true extent of the Citigroup’s problems.
Citigroup made a series of disclosure to investors suggesting it had roughly $13 billion of exposure to subprime-mortgage related assets. But the bank excluded roughly $43 billion of exposure to certain collateralized debt obligations, or C.D.O.s, that turned out to be among the most toxic investments ever devised.
The S.E.C. has concluded that Mr. Crittenden and Mr. Tildesley as well as the bank violated rules governing the disclosure of material information to investors. But the commission did not conclude that the two men were reckless or acted fraudulently.
A spokeswoman for Citigroup declined to comment.