A union pension fund has sued Citigroup Inc. (C), Discover Financial Services (DFS) and The Student Loan Corp. for misleading investors about loan losses that started piling up in 2008, according to a Bloomberg report. Notably, Student Loan Corp. was a former unit of Citigroup that was sold to Discover Financial in 2010.
The pension fund, Oklahoma Firefighters Pension & Retirement System, alleged that they lost money when the stock price of Student Loan Corp. fell following a public disclosure of the company’s losses.
Barely a few days after the sale was announced, Student Loan Corp. disclosed in a filing with the U.S. Securities and Exchange Commission that it was taking a $900 million charge.
According to the pension fund, Student Loan Corp. failed to inform its investors about the increasing risks and losses and issued materially false statements. It accused the company of misleading investors by telling that the company was well positioned and performing well in spite of adverse market conditions.
Several officials of the Student Loan Corp and the companies were sued by the pension fund. However, Citigroup spokeswoman termed this suit as baseless.
Following the financial crisis, several lawsuits have been filed by investors against a number of Wall Street bigs for misleading investors by misrepresenting their financial health in the statements. A number of them have already been penalized and bore that impact on their financials. We believe that this will increase the accountability of the companies and reassure investors about the overall financial market.
CITIGROUP INC (C): Free Stock Analysis Report
DISCOVER FIN SV (DFS): Free Stock Analysis Report
