Citibank 2008 Annual Report Download - page 235

withdrawals (in the aggregate over any 30-day period) that exceed the
greater of $500,000 or 20% of excess net capital. The Net Capital Rule also
authorizes the SEC to order a freeze (for up to 20 business days) on the
transfer of capital if a broker-dealer plans a withdrawal of more than 30% of
its excess net capital (when aggregated with all other withdrawals during the
previous 30 days) and the SEC believes that such a withdrawal may be
detrimental to the financial integrity of the broker-dealer or may jeopardize
the broker-dealer’s ability to pay its customers.
GENERAL BUSINESS FACTORS
In the Company’s judgment, no material part of the Company’s business
depends upon a single customer or group of customers, the loss of which
would have a materially adverse effect on the Company, and no one
customer or group of affiliated customers accounts for as much as 10% of
the Company’s consolidated revenues.
PROPERTIES
Citigroup’s principal executive offices are located at 399 Park Avenue in New
York City. Citigroup, and certain of its subsidiaries, is the largest tenant of
this building. The Company also has office space in Citigroup Center (153
East 53 Street in New York City) under a long-term lease. Citibank leases one
building and owns another in Long Island City, New York, and has a long-
term lease on a building at 111 Wall Street in New York City, which are
totally occupied by the Company and certain of its subsidiaries.
CGMHI has its principal offices in a building it leases at 388 Greenwich
Street in New York City, and also leases the neighboring building at 390
Greenwich Street, both of which are fully occupied by the Company and
certain of its subsidiaries.
Banamex has its principal offices in Mexico City in facilities that are part
owned and part leased by it. Banamex has office and branch sites
throughout Mexico.
The Company owns other offices and certain warehouse space, none of
which is material to the Company’s financial condition or operations.
The Company believes its properties are adequate and suitable for its
business as presently conducted and are adequately maintained. For further
information concerning leases, see Note 29 to the Consolidated Financial
Statements on page 208.
LEGAL PROCEEDINGS
Enron Corp.
Beginning in 2002, Citigroup, CGMI and certain executive officers and
current and former employees (along with, in many cases, other investment
banks and certain Enron officers and directors, lawyers and/or accountants)
were named as defendants in a series of individual and putative class action
lawsuits related to Enron. The putative securities class action and all
remaining individual actions (other than actions brought as part of Enron’s
Chapter 11 bankruptcy proceeding) were consolidated or coordinated in the
United States District Court for the Southern District of Texas. The
consolidated securities class action, brought on behalf of a putative class of
individuals who purchased Enron securities (NEWBY, ET AL. v. ENRON
CORP., ET AL.), alleged violations of Sections 11 and 15 of the Securities Act
of 1933, as amended, and Sections 10 and 20 of the Securities Exchange Act
of 1934, as amended. Citigroup agreed to settle this action on June 10, 2005.
Under the terms of the settlement, approved by the District Court on May 24,
2006, $2.18 billion was paid to an escrow account for the benefit of the
settlement class, which consists of all purchasers of publicly traded equity
and debt securities issued by Enron and Enron-related entities between
September 9, 1997 and December 2, 2001. The amount paid to settle this
action was covered by existing Citigroup litigation reserves.
On April 4, 2008, Citigroup announced an agreement to settle actions
filed by Enron in its Chapter 11 bankruptcy proceedings seeking to recover
payments to Citigroup as alleged preferences or fraudulent conveyances, to
disallow or equitably subordinate claims of Citigroup and Citigroup
transferees on the basis of alleged fraud, and to recover damages from
Citigroup for allegedly aiding and abetting breaches of fiduciary duty. Under
the terms of the settlement, approved by the Bankruptcy Court for the
Southern District of New York on April 24, 2008, Citigroup made a pretax
payment of $1.66 billion to Enron, and waived certain claims against
Enron’s estate. Enron also allowed specified Citigroup-related claims in the
bankruptcy proceeding, including all of the bankruptcy claims of parties
holding approximately $2.4 billion of Enron credit-linked notes (“CLNs”),
and released all claims against Citigroup. Citigroup separately agreed to
settle an action brought by certain trusts that issued the CLNs in question, by
the related indenture trustee and by certain holders of those securities. The
amounts paid to settle these actions were covered by existing Citigroup
litigation reserves.
A number of other individual actions have been settled, including, on
January 21, 2009, the parties settled VANGUARD BALANCED INDEX FUND,
ET AL. v. CITIGROUP, ET AL., an action filed in 2003 in Pennsylvania state
court by certain investment funds, and asserting claims under state securities
and common law, arising out of plaintiffs’ purchase of certain Enron-related
securities. The case had been coordinated with NEWBY (discussed above)
until it was remanded to the United States District Court for the Eastern
District of Pennsylvania in June 2008. Pursuant to the settlement, the case
was voluntarily dismissed on February 4, 2009.
Additional actions remain pending against Citigroup and its affiliates and
JP Morgan Chase, as co-agents on certain Enron revolving credit facilities.
The plaintiffs are commercial banks that participated in the facilities and
purchasers of the resulting Enron bank debt on the secondary market.
Plaintiffs allege that defendants aided and abetted Enron’s fraud, and the
breaches of fiduciary duty of Enron’s officers, by engaging in transactions
that they knew Enron was not properly reporting in its financial statements,
and that defendants knew that Enron was in default under various provisions
of its credit agreements and fraudulently failed to advise the syndicate
members. These cases have been consolidated and are pending in the United
States District Court for the Southern District of New York.
Research
WorldCom, Inc. Beginning in 2002, Citigroup, CGMI and certain executive
officers and current and former employees (along with, in many cases, other
investment banks, certain WorldCom officers and directors, and/or
accountants) were named as defendants in a series of individual and
putative class action lawsuits relating to the underwriting of WorldCom
securities and the issuance of research analyst reports concerning
WorldCom. The putative class action and the majority of the individual
actions were consolidated in the United States District Court for the Southern
District of New York as IN RE WORLDCOM, INC. SECURITIES LITIGATION;
certain individual actions remained pending in other state and federal
courts. Citigroup settled the consolidated putative class action in May 2004.
Citigroup has now settled or obtained dismissal of all but two of the
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