Andrew Cuomo, the New York State Attorney General, plans to imminently charge Citigroup, accusing it of fraudulently marketing and selling auction-rate securities, and destroying documents that had been subpoenaed.

In a letter to the bank, David Markowitz, chief of the state's investor protection bureau, accused the largest US bank by assets of having "repeatedly and persistently committed fraud" by falsely representing to customers that auction-rate debt was safe, liquid and the equivalent of cash, according to Reuters.

He also said Citigroup destroyed audiotapes of phone calls on auction-rate debt that were subject to an April 14 subpoena. The bank learned in mid-June about the destruction, but failed to tell Cuomo's office until June 30, the letter said.

Citigroup said in an emailed statement that recycling tapes is generally its practice. It inadvertently recycled a tape subject to the subpoena but, as soon as it learned that it had, it stopped recycling tapes. "We reported this oversight to the regulators, and we have fully co-operated with them in all aspects of this investigation," the statement said.

Any settlement of the five-month investigation would require New York-based Citigroup to buy back the affected debt at face value, pay damages to investors, and incur a "significant penalty" for its misconduct, the letter said.

Cuomo's office plans to charge Citigroup under the state's Martin Act, which allows civil or criminal charges.

Cuomo sued UBS on July 24 over auction-rate securities, accusing the Swiss bank of a "multi-billion dollar fraud" in steering customers into the debt.

Auction-rate securities have rates that set periodically. The $330 billion (£167 billion) market was once considered safe, but part of it remains frozen after a meltdown in February in which brokerages abandoned their role as buyers of last resort.

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