The U.S. Justice Department has asked Citigroup Inc. for more than $10 billion to settle a probe into the lender's sale of mortgage-backed bonds in the run up to the 2008 financial crisis, according to a person familiar with the negotiations.
Prosecutors broke off talks with Citigroup on June 9 and are preparing to sue the bank after the lender offered less than $4 billion to resolve the matter, said the person who asked not to be named because the negotiations are private. The Justice Department could file a lawsuit as early as next week, the person said.
Citigroup shares fell 1.8% to $47.40 at 11:34 a.m. in New York trading.
The department is taking a similar approach in discussions with Bank of America Corp. Prosecutors also halted talks June 9 after the bank offered to pay more than $12 billion, falling short of the department’s $17 billion request.
Citigroup is among at least eight banks under investigation by the Justice Department for misleading investors about the quality of bonds backed by mortgages as housing prices plummeted. Other banks that have faced scrutiny include Credit Suisse Group AG and Wells Fargo & Co. JPMorgan Chase & Co. agreed to pay $13 billion in November to resolve federal and state investigations of similar conduct.
Citigroup and the department have been negotiating a resolution since April, the person said. Associate Attorney General Tony West told the bank in a phone call on June 9 that Citibank wasn't making acceptable offers, the person said.
Mark Costiglio, a bank spokesman, didn’t immediately respond to phone and email requests for comment.