The civil division of U.S. Attorney for the Southern District of New York is using the False Claims Act as basis for examining Citi's mortgage business - its origination, servicing, sale and securitization practices.  Citigroup noted the examination in a 10-Q (quarterly) filing with the SEC.  The bank is cooperating fully.  Manhattan U.S. Attorney Preet Bharara has been examining the practices of other large mortgage servicers for evidence of potential wrongdoing, as well.  

False Claims Act.   In May, Bharara's office sued Deutsche Bank AG for more than $1 billion, accusing the German bank of repeatedly lying to obtain federal mortgage guarantees.  Deutsche Bank responded by calling the charges "unreasonable and unfair."  In that case, he used the False Claims Act, a provision that prevents companies from taking federal funds under false pretenses and he suggested his office might be investigating the activities other financial firms under the same law.

Citi also said it is one of several large mortgage servicers in talks with the Justice Department, state attorneys general and other federal agencies regarding a settlement for mortgage practices.  Citi said the proposals under discussion would entail both monetary and non-monetary consideration.   [Reuters, 8/5/11]