Citigroup Settles Auction Rate Securities (ARS) Dispute with Hawaii for $869 Million

Citigroup Inc. (C) agreed to buy back $869 million worth of auction rate securities (ARS) it had previously sold to Hawaii and also repay the state for losses on securities it had already liquidated. The state’s ARS purchases began in 1998, after the Citigroup broker, Pete Thompson, successfully lobbied legislators to permit such acquisitions. The investments appreciated from $427 million in July of 2007 to nearly $1.1 billion by February 2008, when the market froze. Bloomberg News reported that the auction rate securities (ARS) were sold to Hawaii as low risk substitutes for U.S. Treasury bills. Since February 2008, Hawaii liquidated at par value $200 million of the securities, which are backed by pools of federally guaranteed student loans. Under the agreement, the state can obtain interim liquidity on as much as $150 million of the securities from July 2012 at market value. Citigroup will then pay the difference between that market value and par in July 2015. Even if Hawaii has to wait a little while to get their money back, it is a big win for them since the Hawaii taxpayers will lose no principal on their investments.

If you have suffered losses from investments in auction rate securities (ARS), please contact our securities law firm for a confidential, no obligation consultation at 1-800-259-9010.

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