Citibank 2009 Annual Report Download - page 273

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LEGAL PROCEEDINGS
In addition to the matters described below, in the ordinary course of business,
Citigroup and its affiliates and subsidiaries and current and former officers,
directors and employees (for purposes of this section, sometimes collectively
referred to as Citigroup and Related Parties) routinely are named as
defendants in, or as parties to, various legal actions and proceedings. Certain
of these actions and proceedings assert claims or seek relief in connection
with alleged violations of consumer protection, securities, banking,
antifraud, antitrust, employment and other statutory and common laws.
Certain of these actual or threatened legal actions and proceedings include
claims for substantial or indeterminate compensatory or punitive damages,
or for injunctive relief.
In the ordinary course of business, Citigroup and Related Parties also
are subject to governmental and regulatory examinations, information-
gathering requests, investigations and proceedings (both formal and
informal), certain of which may result in adverse judgments, settlements,
fines, penalties, injunctions or other relief. Certain affiliates and subsidiaries
of Citigroup are banks, registered broker-dealers or investment advisers and,
in those capacities, are subject to regulation by various U.S., state and foreign
securities and banking regulators. In connection with formal and informal
inquiries by these regulators, Citigroup and such affiliates and subsidiaries
receive numerous requests, subpoenas and orders seeking documents,
testimony and other information in connection with various aspects of their
regulated activities.
Because of the global scope of Citigroup’s operations, and its presence
in countries around the world, Citigroup and Related Parties are subject to
litigation, and governmental and regulatory examinations, information-
gathering requests, investigations and proceedings (both formal and
informal) in multiple jurisdictions with legal and regulatory regimes that
may differ substantially, and present substantially different risks, from those
Citigroup and Related Parties are subject to in the United States.
Citigroup seeks to resolve all litigation and regulatory matters in the
manner management believes is in the best interests of the Company and
contests liability, allegations of wrongdoing and, where applicable, the
amount of damages or scope of any penalties or other relief sought as
appropriate in each pending matter. In view of the inherent unpredictability
of litigation and regulatory matters, particularly where the damages sought
are substantial or indeterminate, the investigations or proceedings are in the
early stages, or the matters involve novel legal theories or a large number
of parties, Citigroup cannot state with certainty the timing or ultimate
resolution of litigations and regulatory matters or the eventual loss, fines,
penalties or business impact, if any, associated with each pending matter.
In accordance with ASC 450 (formerly SFAS 5), Citigroup establishes
reserves for litigation and regulatory matters when those matters present
loss contingencies that both are probable and can be reasonably estimated.
Once established, reserves are adjusted from time to time, as appropriate, in
light of additional information. The actual costs of resolving litigations and
regulatory matters, however, may be substantially higher or lower than the
amounts reserved for those matters.
Subject to the foregoing, it is the opinion of Citigroup’s management,
based on current knowledge and after taking into account available
insurance coverage and its current legal reserves, that the eventual outcome
of such matters, including the matters described below, would not be likely
to have a material adverse effect on the consolidated financial condition of
Citi. Nonetheless, given the substantial or indeterminate amounts sought in
certain of these matters, and the inherent unpredictability of such matters,
an adverse outcome in certain of these matters could, from time to time,
have a material adverse effect on Citi’s consolidated results of operations or
cash flows in particular quarterly or annual periods.
Credit-Crisis-Related Litigation and Other Matters
Citigroup and Related Parties have been named as defendants in numerous
legal actions and other proceedings asserting claims for damages and
related relief for losses arising from the global financial credit and
subprime-mortgage crisis that began in 2007. Such matters include, among
other types of proceedings, claims asserted by: (i) individual investors
and purported classes of investors in Citi’s common and preferred stock
and debt, alleging violations of the federal securities laws; (ii) individual
investors and purported classes of investors in, and issuers of, auction rate
securities alleging violations of the federal securities and antitrust laws; (iii)
shareholders alleging derivative claims related to subprime and auction-rate
securities activities; (iv) participants and purported classes of participants
in Citi’s retirement plans, alleging violations of ERISA; (v) counterparties to
significant transactions adversely affected by developments in the credit and
subprime markets; (vi) individual investors and purported classes of investors
in securities and other investments underwritten, issued or marketed by
Citigroup, and other strategic investments, that have suffered losses as a
result of the credit crisis; (vii) municipalities, related entities and individuals
asserting public nuisance claims; and (viii) individual borrowers asserting
claims related to their loans. These matters have been filed in state and
federal courts across the country, as well as in arbitrations before FINRA and
other arbitration associations.
In addition to these litigations and arbitrations, beginning in the fourth
quarter of 2007, certain of Citigroup’s regulators and other state and federal
government agencies commenced formal and informal investigations and
inquiries, and issued subpoenas and requested information, concerning
Citigroup’s subprime mortgage-related conduct and business activities.
Citigroup is involved in discussions with certain of its regulators to resolve
certain of these matters.
Certain of these litigation and regulatory matters assert claims for
substantial or indeterminate damages. Some of these matters already have
been resolved, either through settlements or court proceedings, including the
complete dismissal of certain complaints or the rejection of certain claims
following hearings.