There’s a reason why the Securities and Exchange Commission didn’t name any Citigroup executives in its settled complaint over disclosures the company made about its subprime exposure: Nobody intentionally misled shareholders.

That’s the heart of the argument that Citigroup’s lawyers at Paul, Weiss, Rifkind, Wharton & Garrison and Wachtell Lipton Rosen & Katz made in a brief filed Monday evening supporting a $75 million settlement with the Securities and Exchange Commission. Last month, Washington, D.C., federal district court Judge Ellen Segal Huvelle postponed approval of the deal, citing her concerns with the pact. She wondered why the SEC named Citigroup’s former chief financial officer, Gary Crittenden, and Citigroup’s former head of investor relations, Arthur Tildesley, in a separate administrative action, but didn’t name any Citi executive in the settled complaint.

Citigroup echoed the arguments made last week by the SEC, which said that it reviewed a massive evidentiary record and concluded that the company had a poor disclosure process (the SEC called it “deeply flawed”) but did not find that anyone intended to mislead shareholders. The SEC explained that it targeted Crittenden and Tildesley because they were most closely tied to the disclosures.

Citigroup argued that it was under no obligation to report its subprime exposure in the second and third quarter of 2007. It made a good faith effort to correctly report its exposure, the company argued, and when it realized it had additional subprime exposure, it promptly disclosed it to the market. The company said that it has since taken steps to improve its disclosure process.

“We argued during the course of the commission’s investigation that neither the company nor any individuals should be charged,” wrote lawyers for Citigroup. “In particular, we argued that while the process of crafting the July and October disclosures had been imperfect, there was no ‘villain’ in the story — that is, Citigroup did not believe, and still does not believe, that any of its personnel acted with an intent to mislead investors.”

Citigroup argued that the proposed settlement was “fair, reasonable, and appropriate,” but that it had hoped to get off with no penalty. “While the commission’s analysis certainly reflects a rational exercise of its discretion, Citigroup argued against the imposition of any penalty, contending, among other reasons, that the company’s current shareholders would bear the expense,” Citigroup’s lawyers wrote. The company, however, settled to avoid the uncertain risk of litigation, the filing states.

This article first appeared on The Am Law Litigation Daily blog on