PIMCO Sues Citigroup Over Failed Mortgages

Pacific Investment Management Co. (PIMCO) has filed a lawsuit against Citigroup Inc., for its role in the failure of $13.8 billion in mortgage-backed securities during the years leading up to the 2008 recession.

According to a Bloomberg report, more than two dozen PIMCO trusts plus Prudential Retirement Insurance & Annuity Co. and Aegon NV, the Dutch parent company of Transamerica Corp., filed a lawsuit yesterday in New York state court that charged Citigroup’s subsidiary Citibank NA was aware that the pools of loans backing the trusts between 2004 and 2007 were polluted with toxic mortgages.

"Citibank knew that the pools of loans backing the trusts were filled with defective mortgage loans that materially breached seller representations and warranties," the trusts said in their complaint, accusing Citigroup of putting together a trust collateral that included "spiraling defaults, delinquencies and foreclosures."

While the plaintiffs did not offer specifics on the financial damages they were seeking, the bank’s monthly reports noted that the trusts lost more than $183.4 million by January 2009. Citigroup did not publicly comment on the lawsuit.