Citibank 2008 Annual Report Download - page 239

Falcon and ASTA/MAT–Related Litigation and Other
Matters
Beginning in April 2008, Citigroup has been named as defendant in various
complaints filed by investors in the Falcon and ASTA/MAT funds, various of
which remain pending.
Zentner v. Citigroup Inc. et al.: On June 26, 2008, an investor in Falcon
Strategies Plus LLC filed a putative class action complaint in New York state
court, asserting claims for fraud and negligent misrepresentation under New
York law, and breach of fiduciary duty under Delaware law, relating to the
marketing of shares and the management of the Falcon fund. Defendants
filed a motion to dismiss the complaint on November 28, 2008.
In re MAT Five Securities Litigation: Three actions asserting claims for
alleged violations of Section 12 of the Securities Act of 1933, as well as
violations of the Delaware Securities Act and breach of fiduciary duty under
Delaware law, were filed by investors in MAT Five LLC in the Southern
District of New York. These actions were consolidated under the caption IN
RE MAT FIVE SECURITIES LITIGATION.A consolidated class action
complaint was filed on October 2, 2008. Defendants filed a motion to dismiss
the complaint on December 4, 2008.
Puglisi v. Citigroup Alternative Investments LLC, et al.: On October 17,
2008, an investor in MAT Five LLC filed a putative class action complaint in
New York state court, alleging breaches of fiduciary duty relating to the
marketing of shares and the management of the MAT Five fund. On
November 11, 2008, defendants filed a notice of removal to the United States
District Court for the Southern District of New York. On December 1, 2008,
the District Court accepted the case as related to IN RE MAT FIVE
SECURITIES LITIGATION (discussed above), and consolidated PUGLISI with
that action. Plaintiff filed a motion to remand the action to state court on
January 9, 2009.
Goodwill v. MAT Five LLC, et al.: On June 26, 2008, an investor in MAT
Five LLC filed a putative class action complaint in California state court,
alleging violations of Section 12 of the Securities Act of 1933 relating to
marketing of shares of MAT Five LLC. On September 2, 2008, defendants filed
a motion to stay this action pending the resolution of IN RE MAT FIVE
SECURITIES LITIGATION (discussed above).
Marie Raymond Revocable Trust, et al. v. MAT Five LLC, et al.:On
June 19, 2008, investors in MAT Five LLC filed a class action complaint in the
Delaware Court of Chancery seeking to enjoin a tender offer for all shares of
MAT Five LLC. On November 10, 2008, a stipulation of settlement was filed
that provided for additional disclosures and additional consideration to be
paid to investors. The settlement was approved by the Chancery Court on
December 19, 2008. An appeal from the Chancery Court’s judgment
approving the settlement was filed by class member objectors on January 14,
2009.
ECA Acquisitions, Inc. v. MAT Three LLC, et al.: On December 22, 2008,
investors in MAT One LLC, MAT Two LLC, and MAT Three LLC filed a putative
class action in New York state court, alleging breaches of fiduciary duty in
connection with the marketing of shares and the management of these
funds. Defendants removed this action to the United States District Court for
the Southern District of New York on January 21, 2009.
Arbitrations. In addition to the various lawsuits discussed above, several
arbitrations are pending against Citigroup and certain of its affiliates
relating to ASTA/MAT investments.
Other Matters. Citigroup and certain of its affiliates also have received
subpoenas and/or requests from various governmental and self-regulatory
agencies regarding the marketing and management of the Falcon and ASTA/
MAT funds. Citigroup and its affiliates are cooperating fully with such
requests.
Allied Irish Bank
On January 31, 2006, the United States District Court for the Southern
District of New York partially denied motions filed by Citibank and a
co-defendant to dismiss a complaint filed by Allied Irish Bank, P.L.C.
(“AIB”) in May 2003, seeking compensatory and punitive damages in
connection with losses sustained by a subsidiary of AIB in 2000–2002. The
complaint alleges that defendants are liable for fraudulent and fictitious
foreign currency trades entered into by one of AIB’s traders through
defendants, who provided prime brokerage services. The court’s ruling on the
motions to dismiss allowed plaintiff’s common law claims, including
fraudulent concealment and aiding and abetting fraud, to proceed.
Adelphia Communications Corporation
On July 6, 2003, an adversary proceeding was filed by the Official Committee
of Unsecured Creditors on behalf of Adelphia Communications Corporation
against certain lenders and investment banks, including CGMI, Citibank,
N.A., Citicorp USA, Inc., and Citigroup Financial Products, Inc. (together, the
“Citigroup Parties”). The complaint alleged that the Citigroup Parties and
numerous other defendants committed acts in violation of the Bank Holding
Company Act, the Bankruptcy Code, and common law. It sought an
unspecified amount of damages. In November 2003, a similar adversary
proceeding was filed by the Equity Holders Committee of Adelphia, asserting
additional statutory and common law claims. In June 2004, motions to
dismiss were filed with respect to the complaints of the two committees.
Those motions were decided by the bankruptcy court, and were granted in
part and denied in part. The district court affirmed in part and reversed in
part the bankruptcy court’s decision. The Adelphia Recovery Trust, which
has replaced the committees as the plaintiff in the action, has filed an
amended complaint on behalf of the Adelphia Estate, consolidating the two
prior complaints; motions to dismiss the amended complaint and answers
have been filed.
In addition, CGMI was among the underwriters named in civil actions
brought by investors in Adelphia debt securities in connection with Adelphia
securities offerings between September 1997 and October 2001. Following
settlements of the class action, which is pending appeal, and other individual
actions, two cases remain outstanding. The Second Circuit is considering
whether the plaintiff in one has proper standing to sue. In September 2007,
motions to dismiss in the other case were granted in part and denied in part.
IPO Securities Litigation
In April 2002, consolidated amended complaints were filed against CGMI
and other investment banks named in numerous putative class actions filed
in the United States District Court for the Southern District of New York,
alleging violations of certain federal securities laws (including Section 11 of
the Securities Act of 1933, as amended, and Section 10(b) of the Securities
Exchange Act of 1934, as amended) with respect to the allocation of shares
for certain initial public offerings, related aftermarket transactions and
damage to investors caused by allegedly biased research analyst reports.
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