Citibank 2008 Annual Report Download - page 236

WorldCom-related individual actions. The amount paid to settle these
actions was covered by existing Citigroup litigation reserves. One of the two
remaining actions, HOLMES, ET AL. v. GRUBMAN, ET AL., was dismissed by
the District Court; an appeal is pending in the United States Court of Appeals
for the Second Circuit.
Metromedia Fiber Network. Beginning in 2002, Citigroup, CGMI and
certain executive officers and current and former employees were named as
defendants in a series of putative class action lawsuits, alleging violations of
the federal securities laws, including Sections 10 and 20 of the Securities
Exchange Act of 1934 in connection with Citigroup research analyst reports.
One of these actions, involving Metromedia Fiber Network, Inc. (“MFN”), IN
RE SALOMON ANALYST METROMEDIA LITIGATION, was brought in the
United States District Court for the Southern District of New York. On
January 6, 2005, the District Court granted in part and denied in part
Citigroup’s motion to dismiss the claims against it. On June 20, 2006, the
District Court certified the plaintiff class in the MFN action. On
September 30, 2008, the District Court’s class certification decision was
vacated on appeal by the United States Court of Appeals for the Second
Circuit. On October 1, 2008, the parties reached a settlement that was
preliminarily approved by the District Court on November 19, 2008. The
amount to be paid to settle this action is covered by existing Citigroup
litigation reserves.
Global Crossing, Ltd. In January 2004, the Global Crossing Estate
Representative filed an adversary action in the United States Bankruptcy
Court for the Southern District of New York against Citigroup and several
other banks seeking to rescind the payment of a loan made to a Global
Crossing subsidiary. Citigroup moved to dismiss the action in May 2004, and
the motion remains pending. On August 20, 2008, Plaintiff filed an amended
complaint that narrowed the pending claims. Citigroup has yet to respond to
the amended complaint.
Disher. In March 2004, a putative research-related customer class action
alleging various state law claims arising out of the issuance of allegedly
misleading research analyst reports, DISHER v. CITIGROUP GLOBAL
MARKETS INC., was filed in Illinois state court. Citigroup removed this
action to federal court, and in August 2005 the United States Court of Appeals
for the Seventh Circuit reversed the District Court’s August 2004 order
remanding the case to state court, and directed the District Court to dismiss
plaintiffs’ claims as preempted. On June 26, 2006, the United States Supreme
Court granted plaintiffs’ petition for a writ of certiorari, vacated the Seventh
Circuit’s opinion and remanded the case to the Seventh Circuit for further
proceedings. On January 22, 2007, the Seventh Circuit dismissed Citigroup’s
appeal from the District Court’s removal order for lack of appellate
jurisdiction. On February 1, 2007, plaintiffs secured an order reopening this
case in Illinois state court, and on February 16, Citigroup removed the
reopened action to federal court. On May 3, 2007, the District Court
remanded the action to Illinois state court, and on June 13, 2007, Citigroup
moved in state court to dismiss the action, which motion remains pending.
Arbitrations. In addition to the various lawsuits discussed above, similar
claims against Citigroup and certain of its affiliates relating to research
analyst reports concerning the securities mentioned above, and other
securities, are pending in several arbitrations around the country.
Parmalat
On July 29, 2004, Enrico Bondi, as extraordinary commissioner of Parmalat
and other affiliated entities (“Bondi”), filed a lawsuit in New Jersey state
court against Citigroup, Citibank, and certain allegedly controlled Citigroup
entities, alleging that the Citigroup defendants participated in fraud
committed by the officers and directors of Parmalat and seeking unspecified
damages. The action alleged a variety of claims under New Jersey state law,
including fraud, negligent misrepresentation, and violations of the New
Jersey Fraudulent Transfer Act and the New Jersey RICO statute. After motion
practice, the Citigroup defendants answered the complaint and Citibank filed
counterclaims alleging causes of action for fraud, negligent
misrepresentation, conversion and breach of warranty.
On April 15, 2008, the court granted the Citigroup defendants’ motion for
summary judgment on all claims, except the claim relating to allegations of
aiding and abetting Parmalat insiders in breaching their fiduciary duties to
Parmalat, insofar as that claim pertained to the insiders’ larceny from
Parmalat. The court also denied Bondi’s motion for summary judgment on
Citibank’s counterclaim.
Trial commenced on May 5, 2008. On October 20, 2008, the jury returned
a verdict in favor of the Citigroup defendants. On Bondi’s claim, the jury
found that the Citigroup defendants were not liable. On Citibank’s
counterclaims, the jury found in favor of Citibank and awarded damages of
$364 million, plus interest and court costs. The court subsequently denied
Bondi’s motions for a new trial on his claim, and for judgment
notwithstanding the verdict on Citibank’s counterclaims. Bondi filed a notice
of appeal on January 28, 2009.
Citigroup (along with, among others, numerous other investment banks
and certain former Parmalat officers and accountants) also is involved in
various Parmalat-related proceedings in Italy. In one such action, the Milan
prosecutor has obtained the indictments of numerous individuals, including
a Citigroup employee, for offenses under Italian law that arise out of the
collapse of Parmalat. The trial in this action commenced on January 22,
2008, and is ongoing. In connection with this proceeding, the Milan
prosecutor may seek administrative remedies against Citigroup. In addition,
a number of private parties, including former investors in Parmalat
securities, have applied to join the Milan proceedings as civil claimants and
are seeking unspecified civil damages against numerous parties, including
the Citigroup defendants. In Parma, a public prosecutor is conducting a
criminal investigation into alleged bankruptcy offenses relating to the
collapse of Parmalat. In December 2007, the prosecutor notified 12 current
and former Citigroup employees that he is seeking their indictment. A
preliminary hearing on the alleged offenses with respect to these Citigroup
employees began on April 21, 2008, and is ongoing. On October 8, 2008, the
Italian Court issued an order permitting Parmalat investors to proceed with
civil claims against Citigroup, subject to proper service of a summons on
Citigroup. Additionally, Bondi has attempted to file a civil complaint against
Citigroup in the context of the Parma proceedings, seeking 14 billion Euro
in damages. The Italian Court directed him to serve the complaint, which he
did in November 2008.
Subprime Mortgage–Related Litigation and Other Matters
Beginning in November 2007, Citigroup and a number of current and
former officers, directors, and employees have been named as defendants in
numerous complaints brought by Citigroup shareholders, investors,
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