Citibank 2009 Annual Report Download - page 275

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Antitrust Actions: Two antitrust actions were filed in the Southern District
of New York on behalf of purported classes of ARS issuers and investors,
respectively, against Citigroup, CGMI and various other financial institutions.
In these actions, plaintiffs allege violations of Section 1 of the Sherman Act
arising out of defendants’ alleged conspiracy to restrain trade in the ARS
market. On January 26, 2010, both actions were dismissed.
Lehman Structured Notes Matters
Like many other financial institutions, Citigroup, through certain of its
affiliates and subsidiaries, distributed structured notes issued and guaranteed
by Lehman entities to retail customers in various countries outside the United
States, principally in Europe and Asia. After the relevant Lehman entities filed
for bankruptcy protection in September 2008, certain regulators in Europe
and Asia commenced investigations into the conduct of financial institutions
involved in such distribution, including Citigroup entities. These regulatory
investigations are in various stages, and some have resulted in adverse
findings against Citigroup entities. Some purchasers of the notes have filed
civil actions or otherwise complained about the sales process. Citigroup has
generally dealt with such complaints and claims on an individual basis
based on the particular circumstances. In Belgium and in Poland, however,
Citigroup has made a settlement offer to all eligible purchasers of notes
distributed by Citigroup in those countries. A significant majority of the
eligible purchasers have accepted these offers. Also in Belgium, a criminal
case is proceeding against a Citigroup subsidiary, two current employees
and one former employee. Citigroup disputes that it or its employees have
engaged in any wrongdoing in connection with the distribution of Lehman
notes in Belgium or elsewhere and is defending the charges. Criminal
investigations have also commenced in Greece and Poland.
Interchange Fees Litigation
Beginning in 2005, several putative class actions were filed against Citigroup
and certain of its subsidiaries, together with Visa, MasterCard and other
banks and their affiliates, in various federal district courts. These actions
were consolidated with other related cases in the Eastern District of New
York and captioned IN RE PAYMENT CARD INTERCHANGE FEE AND
MERCHANT DISCOUNT ANTITRUST LITIGATION. The plaintiffs in the
consolidated class action are merchants that accept Visa and MasterCard
branded payment cards as well as membership associations that claim to
represent certain groups of merchants. The pending complaint alleges,
among other things, that defendants (including the Citigroup defendants)
have engaged in conspiracies to set the price of interchange and merchant
discount fees on credit and debit card transactions in violation of Section 1
of the Sherman Act and a California statute. The complaint also alleges
additional Sherman Act and California law violations, including alleged
unlawful maintenance of monopoly power and alleged unlawful contracts in
restraint of trade pertaining to various Visa and MasterCard rules governing
merchant conduct (including rules allegedly affecting merchants’ ability, at
the point of sale, to surcharge payment card transactions or steer customers
to particular payment cards). In addition, supplemental complaints filed
against defendants in the class action allege that Visa’s and MasterCard’s
respective initial public offerings were anticompetitive and violated Section 7
of the Clayton Act, and that MasterCard’s initial public offering constituted a
fraudulent conveyance.
In addition to injunctive relief, plaintiffs seek joint and several liability for
treble the amount of damages, including all interchange fees paid to all Visa
and MasterCard members with respect to Visa and MasterCard transactions
in the U.S. since at least January 1, 2004. Defendants’ motions to dismiss
the pending class action complaint and the supplemental complaints are
pending. Also pending is plaintiffs’ motion to certify nationwide classes
consisting of all U.S. merchants. Discovery has closed, with the exception of
expert discovery.
Parmalat Litigation and Other Matters
On July 29, 2004, Dr. Enrico Bondi, the Extraordinary Commissioner
appointed under Italian law to oversee the administration of various
Parmalat companies, filed a complaint in New Jersey state court against
Citigroup and Related Parties alleging that the defendants “facilitated” a
number of frauds by Parmalat insiders. The complaint asserted 10 claims,
nine of which were dismissed pretrial, arising out of four sets of transactions
involving Parmalat companies; Citibank, N.A. asserted several counterclaims.
On October 20, 2008, following trial, a jury rendered a verdict in Citigroup’s
favor on plaintiff’s remaining claim, and in favor of Citibank on three
counterclaims. The court entered judgment for Citibank in the amount of
$431 million on the counterclaims. Plaintiff’s appeal from the court’s final
judgment is pending. In addition, prosecutors in Parma and Milan, Italy,
are conducting a criminal investigation of Citigroup and certain current
and former Citigroup employees (along with numerous other investment
banks and certain of their current and former employees, as well as former
Parmalat officers and accountants). In the event of an adverse judgment
against the individuals in question, it is possible that the authorities could
seek administrative remedies against Citigroup. Additionally, Dr. Bondi has
purported to file a civil complaint against Citigroup in the context of the
Parma criminal proceedings, seeking 14 billion Euro in damages.