Citibank 2008 Annual Report Download - page 237

counterparties and others concerning Citigroup’s activities relating to
subprime mortgages, including Citigroup’s exposure to collateralized debt
obligations (“CDOs”), mortgage-backed securities (“MBS”), and structured
investment vehicles (“SIVs”), Citigroup’s underwriting activity for subprime
mortgage lenders, and Citigroup’s more general involvement in subprime-
and credit-related activities.
Securities Actions:Four putative class actions were filed in the
Southern District of New York by Citigroup shareholders alleging violations
of Sections 10 and 20 of the Securities Exchange Act of 1934. On August 19,
2008, these actions were consolidated under the caption IN RE CITIGROUP
SECURITIES LITIGATION, and lead plaintiff and counsel were appointed.
Plaintiffs’ consolidated amended class action complaint was filed on
December 1, 2008, and alleges, among other things, that Citigroup’s stock
price was artificially inflated as a result of purportedly misleading disclosures
concerning Citigroup’s subprime mortgage–related exposures.
On September 30 and October 28, 2008, Citigroup, certain Citigroup
entities, certain current and former directors and officers of Citigroup and
Citigroup Funding, Inc., and certain underwriters of Citigroup notes
(including CGMI) were named as defendants in two putative class actions
filed in New York state court but since removed to the United States District
Court for the Southern District of New York. These actions allege violations of
Sections 11, 12, and 15 of the Securities Act of 1933, arising out of various
offerings of Citigroup notes during 2006, 2007, and 2008. On December 10,
2008, these two actions were consolidated under the caption IN RE
CITIGROUP INC. BOND LITIGATION, and lead plaintiff and counsel were
appointed. On January 15, 2009, plaintiffs filed a consolidated class action
complaint.
Derivative Actions: Eleven derivative actions have been filed against
various current and former officers and directors of Citigroup alleging
mismanagement in connection with subprime mortgage–related exposures.
Citigroup is named as a nominal defendant in these actions.
On February 5, 2008, four derivative actions filed in Delaware Chancery
Court were consolidated under the caption IN RE CITIGROUP INC.
SHAREHOLDER DERIVATIVE LITIGATION and lead plaintiff and counsel
were appointed. On September 15, 2008, the parties stipulated to the filing of
the consolidated second amended derivative complaint. Defendants filed
motions to dismiss and stay the complaint on November 5, 2008. On
February 24, 2009, the court dismissed every claim in the complaint except
one, as to which it said that it did not have sufficient information.
On August 22, 2008, the five derivative actions filed in the Southern
District of New York were consolidated under the caption IN RE CITIGROUP
INC. SHAREHOLDER DERIVATIVE LITIGATION, and lead plaintiff and
counsel were appointed. On November 11, 2008, plaintiffs filed a
consolidated complaint, which alleges federal securities fraud and state law
violations. Defendants filed a motion to dismiss the complaint on
December 23, 2008.
Two derivative actions filed in New York state court have been stayed by
stipulation between the parties.
ERISA Actions: Fourteen putative class actions have been filed in the
Southern District of New York asserting claims under the Employee
Retirement Income Security Act (“ERISA”) against Citigroup and certain
Citigroup employees alleged to have served as ERISA plan fiduciaries. On
January 22, 2008, 13 of these actions were consolidated under the caption IN
RE CITIGROUP ERISA LITIGATION, and lead plaintiff and counsel were
appointed. On December 16, 2008, the fourteenth action was consolidated
into this litigation. On September 15, 2008, plaintiffs filed a consolidated
amended complaint on behalf of a purported class of participants in
Citigroup-sponsored ERISA plans from January 1, 2007 through January 15,
2008. The complaint alleges that defendants offered Citigroup’s common
stock as an investment option in the Company’s 401(k) plans when it was no
longer prudent to do so, and that defendants failed adequately to disclose
Citigroup’s subprime exposure to ERISA plan beneficiaries. Defendants filed
a motion to dismiss the complaint on November 21, 2008.
Other Matters:
Underwriting Actions. American Home Mortgage. On March 21, 2008, 19
putative class actions brought by shareholders of American Home Mortgage
Investment Corp., pending in the United States District Court for the Eastern
District of New York, were consolidated under the caption IN RE AMERICAN
HOME MORTGAGE SECURITIES LITIGATION. On June 3, 2008, plaintiffs
filed a consolidated amended complaint, alleging violations of Sections 11
and 12 of the Securities Act of 1933 arising out of allegedly false and
misleading statements contained in the registration statements and
prospectuses issued in connection with two offerings of American Home
Mortgage securities underwritten by CGMI, among others. Defendants,
including Citigroup and CGMI, filed a motion to dismiss the complaint on
September 12, 2008.
Countrywide. The Company has been named in several putative class
actions lawsuits alleging violations of Section 11 and 12 of the Securities Act
of 1933 relating to its role as one of numerous underwriters of offerings of
securities and mortgage pass-through certificates issued by Countrywide. The
lawsuits include a consolidated action filed in the United States District Court
for the Central District of California and two other lawsuits pending in the
Superior Court of the California, Los Angeles County.
Lehman. The Company has been named in several putative class action
lawsuits alleging violations of Section 11 and 12 of the Securities Act of 1933
relating to its role as one of numerous underwriters of offerings of securities
issued by Lehman Brothers. The lawsuits are currently pending in the United
States District Courts for the Southern District of New York, the Eastern
District of New York and the Eastern and Western Districts of Arkansas.
Fannie Mae. Beginning in August 2008, Citigroup Global Markets Inc.,
along with a number of other financial institutions, was named as a
defendant in eight complaints filed by shareholders of Federal National
Mortgage Association (“Fannie Mae”) in connection with the underwriting
of three offerings of Fannie Mae stock during 2007 and 2008. CGMI, along
with the other defendants, moved to dismiss three of the suits that alleged
violations of Section 12(a)(2) of the Securities Act of 1933. The remaining
actions allege violations of Section 10(b) of the Securities Exchange Act. On
January 29, 2009, the U.S. Judicial Panel on Multidistrict Litigation heard
oral argument on whether all lawsuits pending against CGMI and several
other lawsuits pending against other defendants should be consolidated.
Freddie Mac. Citigroup Global Markets Inc., along with a number of
other financial institutions, has been named as a defendant in two lawsuits
pending in the United States District Court for the Southern District of New
York brought by Freddie Mac shareholders who purchased preferred shares
traceable to a November 2007 offering of Z Preferred Shares. Plaintiffs allege
violations of Section 12(a)(2) of the Securities Act of 1933 and Section 10(b)
of the Securities Exchange Act of 1934 because the offering materials failed
to disclose Freddie Mac’s exposure to mortgage-related losses, poor
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