ALBANY — New York Attorney General Andrew Cuomo says he is prepared to charge Citigroup Global Markets and Citi Smith Barney with fraudulent marketing and sales of auction rate securities and with the destruction of documents.

In a letter to Citigroup’s counsel, Mr. Cuomo says the company has committed fraud by misrepresenting details of the marketing, sale, and underwriting of its auction-rate securities.

Mr. Cuomo says a settlement is possible with Citigroup if they meet several requirements, including buying back retail investors’ securities and reimbursing them for damages. Mr. Cuomo also wants the company to immediately work to make investors and corporations whole and to pay a penalty for misconduct.

In a written statement, Citigroup said: “We are actively working with regulatory authorities, including the NY Attorney General, to secure the best and fastest route to providing liquidity. Citi has acted in good faith and in the best interests of our clients both before and since auctions began to fail, and there is simply no basis for claims to the contrary.”