Citigroup Global Markets to Pay Back $95.5M Over ARS Sold to LandAmerica Exchange Fund

A federal bankruptcy judge has approved a settlement involving Citigroup Global Markets Inc. agreeing to repay $95.5 million to clients who sustained auction-rate securities related-losses. The ARS were told by Citigroup to LandAmerica 1031 Exchange Services Inc. before the latter folded in 2008. The ARS had been valued at about $120 million. The repurchase rate that clients are getting is reportedly better than what the ARS can be sold for now.

Under the approved securities settlement, these creditors should recover a little over 50% of their financial losses. The distribution of the money should begin taking place in December.

LandAmerica 1031 Exchange Services Inc. and parent company LandAmerica Financial Group Inc. filed for Chapter 11 bankruptcy in November 2008. Over 250 clients had placed proceeds from investment property sales in the exchange. Their intention was to defer capital gains taxes while searching for other properties to purchase.

Unfortunately, because the exchange company invested some of the funds in ARS, when the market froze and LandAmerica filed for bankruptcy, the investors became unable to access their money. At the time of the bankruptcy, Landmark held $201.7 million in ARS. $30 million of the securities had sold.

Meantime, the US Securities and Exchange Commission has received complaints claiming that Citigroup engaged in misrepresentation and securities fraud related to the credit worthiness and liquidity of the securities.

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