Citigroup Whistle-Blower Says ‘Brute Force’ Hid Bad Loans

Signage is displayed outside a Citibank branch on the ground floor of Citigroup Inc. headquarters in New York.

Signage is displayed outside a Citibank branch on the ground floor of Citigroup Inc. headquarters in New York. Photographer: Jin Lee/Bloomberg

Four years after rotten mortgages helped trigger a global financial crisis, Sherry Hunt said her Citigroup Inc. quality-control team was still finding flaws in new loans that included altered tax forms, straw buyers and borrowers who listed fictitious employers.

Instead of reporting the defects to the Federal Housing Administration, the bank saddled the agency with losses by falsely declaring the loans fit for its federal insurance program, according to a complaint filed yesterday by the U.S. Attorney’s Office in Manhattan. Citigroup agreed to pay $158.3 million to settle the claims, and admitted that it certified loans for FHA backing that didn’t qualify.

Hunt, who filed a sealed lawsuit against New York-based Citigroup in August that the government joined, will collect $31 million of that sum -- before taxes and attorney’s fees -- as a whistle-blower, she said in an interview yesterday. The settlement, which encompassed misconduct spanning 2004 to the present, indicates Citigroup has lingering p