In one of the largest settlements arising from corporate scandals in the past five years, US-based Citigroup Inc has agreed to pay $2.65 billion to investors who claimed that the bank helped hide huge losses that was piling up at WorldCom, the beleaguered telecom giant.
In addition to the $2.65 billion for WorldCom investors, Citigroup said on Monday that it would increase reserves to cover potential costs of other litigation and settlement to $6.7 billion.
Citigroup, the nation's largest bank, faces multiple investor lawsuits and arbitration claims stemming from its work for bankrupt energy trader Enron Corp as well as its research reports on other telecommunication companies.
Citigroup chief executive Charles O Prince said the bank decided to settle the WorldCom class action suits rather than taking the matter to court. The WorldCom plaintiffs were seeking $54 billion.
"What I have done, I think, is to buy an insurance policy for $1.64 billion after tax against a roll of the dice in front of a jury in a few months," he said.
"We want to put the entire era behind us."
The $2.65 billion settlement will cost Citigroup $1.64 billion because the bank will take a tax deduction for the payment.