Citibank 2009 Annual Report Download - page 276

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Adelphia Litigation
Adversary proceedings were filed in 2003 by the Official Committee of
Unsecured Creditors and the Equity Holders Committee on behalf of Adelphia
Communications Corporation and affiliated parties against certain Citigroup
affiliates and subsidiaries as well as other lenders and investment banks
asserting violations of the Bank Holding Company Act, the Bankruptcy
Code, and common law. The complaints sought unspecified damages and
recovery of certain purportedly fraudulent transfers. Following litigation
of motions to dismiss, the Adelphia Recovery Trust (the ART), which
replaced the committees as plaintiffs in the actions, filed a consolidated
amended complaint on behalf of the Adelphia Estate. The district court
granted in part and denied in part the defendants’ motions to dismiss the
consolidated complaint. The ART’s appeal to the Second Circuit from that
partial dismissal is pending. Before the district court, the parties are briefing
summary judgment. Trial of any claims that survive is scheduled for
September 2010.
Bruno’s Litigation
Plaintiffs, purchasers of senior subordinated notes issued in connection
with a 1995 leveraged recapitalization of Bruno’s Inc., filed a complaint in
Alabama state court against certain Citigroup subsidiaries and affiliates, and
other defendants, in 2004, alleging violations of state law arising out of an
underwriting of Bruno’s securities. Plaintiffs seek “hundreds of millions of
dollars” in damages. In January 2010, prior to trial, the Citigroup defendants
entered into a settlement conditioned on court approval.
Research Analyst Litigation
Beginning in 2002, Citigroup and Related Parties were named as defendants
in a series of individual and putative class action lawsuits relating to the
issuance of research analyst reports concerning WorldCom and other issuers.
One individual WorldCom action remains pending on appeal in the Second
Circuit, following dismissal of the complaint by the federal district court
for the Southern District of New York. The Second Circuit certified certain
questions of law to the Georgia Supreme Court, which has issued an opinion
answering those questions. The Second Circuit has not yet decided the appeal.
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 concerning numerous issuers was filed against
certain Citigroup defendants in Illinois state court. Citigroup’s motion to
dismiss the complaint is pending.
Cash Balance Plan Litigation
Beginning in June 2005, several putative class actions were filed in the
Southern District of New York by certain participants in the Citigroup
Pension Plan (Plan), alleging violations of ERISA against the Plan and
other Citigroup defendants. In December 2006, the district court denied
defendants’ summary judgment motion; granted summary judgment to
plaintiffs on certain claims; and ordered the Plan reformed to comply with
ERISA. In January 2008, the court entered a partial final judgment on certain
of plaintiffs’ claims and stayed the judgment pending appeal. On October 19,
2009, the Second Circuit reversed the district court’s order granting summary
judgment for plaintiffs and dismissed plaintiffs’ complaint. On January 12,
2010, the Second Circuit denied rehearing.
Allied Irish
In 2003, Allied Irish Bank (AIB) filed a complaint in the Southern District
of New York seeking to hold Citibank and Bank of America, former prime
brokers for AIB’s subsidiary, Allfirst Bank (Allfirst), liable for losses incurred
by Allfirst as a result of fraudulent and fictitious foreign currency trades
entered into by one of Allfirst’s traders. The Court granted in part and denied
in part defendants’ motions to dismiss, and the parties are currently engaged
in discovery.
Settlement Payments
Payments required in settlement agreements described above have been
made or are covered by existing litigation reserves.
Additional lawsuits containing claims similar to those described above may
be filed in the future.