Citibank 2010 Annual Report Download - page 287

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pursuant to which Citigroup agreed to pay a $75 million civil penalty and to
maintain certain disclosure policies, practices and procedures for a three-year
period. Additional information relating to this action is publicly available in
court filings under the docket number 10 Civ. 1277 (D.D.C.) (Huvelle, J.).
The Federal Reserve Bank, the OCC and the FDIC, among other federal
and state authorities, are investigating issues related to the conduct of certain
mortgage servicing companies, including Citigroup affiliates, in connection
with mortgage foreclosures. Citigroup is cooperating fully with these
inquiries.
Securities Actions: Citigroup and Related Parties have been named as
defendants in four putative class actions filed in the Southern District of
New York. These actions allege violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934. On August 19, 2008, these actions
were consolidated under the caption IN RE CITIGROUP INC. SECURITIES
LITIGATION. In this action, lead plaintiffs assert claims on behalf of
a putative class of purchasers of Citigroup stock from January 1, 2004
through January 15, 2009. On November 9, 2010, the district court issued
an order and opinion granting in part and denying in part defendants’
motion to dismiss the amended consolidated class action complaint. The
court dismissed all claims except those arising out of Citigroup’s exposure
to CDOs for the time period February 1, 2007 through April 18, 2008. Fact
discovery has begun. A class certification motion has not yet been filed, and
plaintiffs have not yet quantified the putative class’s alleged damages. During
the putative class period, as narrowed by the court, the price of Citigroup’s
common stock declined from $54.73 at the beginning of the period to $25.11
at the end of the period. Additional information relating to this action is
publicly available in court filings under the consolidated lead docket number
07 Civ. 9901 (S.D.N.Y.) (Stein, J.).
Citigroup and Related Parties also have been named as defendants in two
putative class actions filed in New York state court, but since removed to 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 actions were consolidated under the caption IN RE CITIGROUP INC.
BOND LITIGATION. In the consolidated action, lead plaintiffs assert claims
on behalf of a putative class of purchasers of 48 corporate debt securities,
preferred stock, and interests in preferred stock issued by Citigroup and
related issuers over a two-year period from 2006 to 2008. On July 12, 2010,
the district court issued an order and opinion granting in part and denying in
part defendants’ motion to dismiss the consolidated class action complaint.
The court, among other things, dismissed plaintiffs’ claims under Section 12
of the Securities Act of 1933, but denied defendants’ motion to dismiss certain
claims under Section 11 of that Act. A motion for partial reconsideration of
the latter ruling is pending. Fact discovery has begun. A class certification
motion has not yet been filed, and plaintiffs have not yet quantified the
putative class’s alleged damages. Additional information relating to this
action is publicly available in court filings under the consolidated lead
docket number 08 Civ. 9522 (S.D.N.Y.) (Stein, J.).
Several institutions and sophisticated investors that purchased debt and
equity securities issued by Citigroup and related issuers have also filed actions
on their own behalf against Citigroup and Related Parties in the Southern
District of New York and the Court of Common Pleas for Philadelphia
County. These actions assert claims similar to those asserted in the IN RE
CITIGROUP INC. SECURITIES LITIGATION and IN RE CITIGROUP INC.
BOND LITIGATION actions described above. Collectively, these investors
seek damages exceeding $1 billion. Additional information relating to
these individual actions is publicly available in court filings under the
docket numbers 09 Civ. 8755 (S.D.N.Y.) (Stein, J.), 10, Civ. 7202 (S.D.N.Y.)
(Stein, J.), 10 Civ. 9325 (S.D.N.Y.) (Stein, J.), 10 Civ. 9646 (S.D.N.Y.)
(Stein, J.), 11 Civ. 314 (S.D.N.Y.) (Stein, J.), and Case No. 110105028
(Pa. Commw. Ct.) (Sheppard, J.).
ERISA Actions: Numerous class actions were filed in the Southern District
of New York asserting claims under ERISA against Citigroup and certain
Citigroup employees alleged to have served as ERISA plan fiduciaries.
On August 31, 2009, the court granted defendants’ motion to dismiss the
consolidated class action complaint, captioned IN RE CITIGROUP ERISA
LITIGATION. Plaintiffs have appealed the dismissal, and the appeal is fully
briefed and argued. Additional information relating to this action is publicly
available in court filings under the consolidated lead docket number 07 Civ.
9790 (S.D.N.Y.) (Stein, J.) and under GRAY v. CITIGROUP INC., 09-3804
(2d Cir.).
Derivative Actions and Related Proceedings: Numerous derivative
actions have been filed in federal and state courts against various current
and former officers and directors of Citigroup, alleging mismanagement in
connection with the financial credit and subprime mortgage crisis. Citigroup
is named as a nominal defendant in these actions. Certain of these actions
have been dismissed either in their entirety or in large part. Additional
information relating to these actions is publicly available under the index
number 650417/09 (N.Y. Super. Ct.) (Fried, J.), the consolidated lead docket
number 07 Civ. 9841 (S.D.N.Y.) (Stein, J.), and the consolidated civil action
number 3338-CC (Del. Ch.) (Chandler, C.).
Underwriting Matters: Certain Citigroup affiliates and subsidiaries have
been named as defendants arising out of their activities as underwriters of
securities in actions brought by investors in securities of issuers adversely
affected by the credit crisis, including AIG, Fannie Mae, Freddie Mac, Ambac
and Lehman, among many others. These matters are in various stages of
litigation. As a general matter, issuers indemnify underwriters in connection
with such claims. In certain of these matters, however, Citigroup is not being
indemnified or may in the future cease to be indemnified because of the
financial condition of the issuer.
On December 3, 2010, plaintiffs and the underwriter defendants,
including Citigroup, in IN RE AMBAC FINANCIAL GROUP, INC. SECURITIES
LITIGATION, 08 Civ. 0411 (S.D.N.Y.), entered into a memorandum of
understanding settling all claims against Citigroup subject to the entry of a
final stipulation of settlement and court approval.
Subprime Counterparty and Investor Actions: Citigroup and Related
Parties have been named as defendants in actions brought in various state
and federal courts, as well as in arbitrations, by counterparties and investors
that have suffered losses as a result of the credit crisis. These actions include
an arbitration brought by the Abu Dhabi Investment Authority, alleging
statutory and common law claims in connection with its $7.5 billion
investment in Citigroup. The Abu Dhabi Investment Authority alleges losses
of $4 billion. Pre-hearing proceedings in this matter are ongoing. The
arbitration hearing has been scheduled for May 2011.