Citigroup agreed on Wednesday to pay $158 million to settle a lawsuit over bad loans that the bank passed on to the Federal Housing Administration to insure. The whistle-blower who originally brought the case, Sherry Hunt, an employee of Citi’s mortgage department, said the company actively undermined the process that was supposed to check for fraud in order to push through reckless loans and get higher profits.

The suit itself makes for good reading. We’ve pulled out the juiciest bits, and explain just what Citi appears to have been doing.

Some background: The FHA insures one-third of the mortgages loans in the country, taking on the risk of homeowners’ default from lenders like Citi. The government requires lenders to certify that insured loans meet FHA standards.

Citi appears to have flouted those standards. According to the lawsuit, the bank passed along subpar loans to the FHA until very recently, making “substantial profits through the sale and/or securitization of FHA-backed insured mortgages” while “it wrongfully endorsed mortgages that were not eligible.”

In the settlement, Citi, which was bailed out by taxpayers in 2008 to the tune of $45 billion, “admits, acknowledges, and accepts responsibility” for passing on bad loans.

The suit’s allegations

Citi was passing on mortgages with particularly high rates of default to the FHA, costing taxpayers millions in insurance claims: Click here.

The quality control unit in charge of reviewing the mortgages had “marching orders” to pass questionable loans by “brute force”: Click here.

The company started basing compensation for some employees on how many loans got through quality control, intensifying the pressure: Click here.

In January 2011, Citi gave awards to employees who had successfully challenged quality control ratings. In a detailed Bloomberg News story, the whistle-blower, Hunt, said that at the awards ceremony, quality control workers “were humiliated in front of everyone“: Click here.

Lenders are supposed to self-report to the government when they discover fraudulent or shoddy loans. But Citi almost never did: Click here.

At one point, Citi erased the records of nearly 1,000 potentially fraudulent loans: Click here.

Citi’s settlement

The company admits to passing on loans that were “not eligible” for government guarantees: Click here.

Citi has to pay $158.3 million within 30 days. Of that sum, $30 million will go to the whistle-blower. The suit was filed under the False Claims Act, which rewards whistle-blowers who bring cases resulting in settlements in which it was alleged that the government was defrauded: Click here.

The government has reserved the right to pursue criminal charges: Click here.

A spokesman for Citigroup said in an emailed statement: “We take our quality assurance processes seriously and have pro-actively undertaken process improvements to ensure that they are as robust as possible. Our government-related business is very important to us, and we will continue as a participant in the FHA’s Direct Endorsement Lender Program with the full support of HUD.”

Citi isn’t the only bank facing these kinds of allegations — as part of last week’s mortgage settlement, Bank of America will pay the FHA up to $1 billion for fraud and abusive foreclosure practices.

by Cora Currier ProPublica, Feb. 16, 2012, 5:34 p.m.

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After almost seven weeks of contract negotiations in Detroit, Michigan, the United Auto Workers Union (UAW) and General Motors (GM) agreed on a new, four-year contract on September 20. The new contract includes pay raises for entry-level workers, and new healthcare benefits, as well as job creation and retention.

Current second-tier workers will earn $18.28 by the end of the four years. Starting wages will range from $14.78 to $16.53, depending on seniority. First-tier workers will earn $19.28 at the end of the four years. Starting wages for first-tier workers will be $15.78 to $17.53, also dependent on seniority.

New employees will also receive annual pay raises. At the end of a four year period, they will earn the same amount as current employees. How much they earn is based on which tier they are part of. They will also receive a $5,000 signing bonus as part of the new contract.

As part of the new contract, employees will be able to visit the doctor as many times they as they need and pay $25 for each visit. They will also have annual wellness physical exams, paid in full by GM. They will not have co-pay for emergency room or urgent care visits. Workers will also have improved dental care. Doctor’s visits were also extended to workers’ children.

Approximately 6,400 jobs that would have been sent to factories in Mexico will be created or saved for the US. Additionally, new products and jobs will be created at current factories in Tennessee, Michigan, and Montana, and a soon-to-be-determined factory in Indiana. The new jobs and products is the result of a $2.5 billion investment from GM.

The old contract expired on September 14 at 11:59 p.m. This was the first set of contract negotiations since GM filed for Chapter 11 bankruptcy in June 2009. President Obama urged the company to pursue aggressive budget cuts to avoid bankruptcy, but the company was unsuccessful. According to a CBS timeline of GM, the company had almost $200 billion in debt. In July 2009, the US government bailed out the company for $50 billion.

The UAW also began negotiations with Chrysler and Ford. Chrysler is expected to come up with an agreement with the UAW soon. The company agreed to extend its contract with the UAW, and they will continue talks. Ford has extended negotiations to mid-October.

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