Citibank 2011 Annual Report Download - page 296

274
date, 79 decisions have been rendered at the district court level, and CKI has
prevailed in 63 of those decisions. In the other 16 decisions, plaintiffs were
awarded only a portion of the damages sought. The damage awards total in
the aggregate approximately $19.5 million. CKI is appealing the 16 adverse
decisions. A significant number of plaintiffs that had decisions rendered
against them are also filing appeals, including plaintiffs that were awarded
less than all of the damages they sought. In the single plaintiff’s appeal that
has been decided, the decision was in CKI’s favor.
Korean prosecutors undertook a criminal investigation of local banks,
including CKI, based on allegations of fraud in the sale of these products. In
July 2011 prosecutors decided not to proceed with indictments. That decision
has been appealed.
Tribune Company Bankruptcy
Certain Citigroup affiliates have been named as defendants in adversary
proceedings related to the Chapter 11 cases of Tribune Company (Tribune)
pending in the United States Bankruptcy Court for the District of Delaware.
The complaints, which arise out of the approximate $11 billion leveraged
buyout (LBO) of Tribune in 2007, were stayed by court order pending
a confirmation hearing on competing plans of reorganization. On
October 31, 2011, the bankruptcy court denied confirmation of both the
competing plans. A third amended plan of reorganization was then proposed,
and confirmation proceedings are expected to take place in 2012. Additional
information relating to these actions is publicly available in court filings
under the lead docket number 08-13141 (Bankr. D. Del.) (Carey, J.). Certain
Citigroup affiliates also have been named as defendants in actions brought
by Tribune creditors alleging state law constructive fraudulent conveyance
claims relating to the Tribune LBO. These actions have been stayed pending
confirmation of a plan of reorganization. Additional information relating to
these actions is publicly available in court filings under the docket number
11 MD 02296 (S.D.N.Y.) (Holwell, J.).
Interchange Fees Litigation
Beginning in 2005, several putative class actions were filed against Citigroup
and Related Parties, 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 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. 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.
Plaintiffs seek injunctive relief as well as joint and several liability for
treble their 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. Certain publicly available documents
estimate that Visa- and MasterCard-branded cards generated approximately
$40 billion in interchange fees industry wide in 2009. Defendants dispute
that the manner in which interchange and merchant discount fees are set,
or the rules governing merchant conduct, are anticompetitive. Fact and
expert discovery has closed. Defendants’ motions to dismiss the pending
class action complaint and the supplemental complaints are pending. Also
pending are plaintiffs’ motion to certify nationwide classes consisting of all
U.S. merchants that accept Visa- and MasterCard-branded payment cards
and motions by both plaintiffs and defendants for summary judgment.
The parties have been engaged in mediation for several years, including
recent settlement conferences held at the direction of the court. Additional
information relating to these consolidated actions is publicly available in
court filings under the docket number MDL 05-1720 (E.D.N.Y.) (Gleeson, J.).
Parmalat Litigation and Related 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, among other things, that the
defendants “facilitated” a number of frauds by Parmalat insiders. On
October 20, 2008, following trial, a jury rendered a verdict in Citigroup’s
favor on Parmalat’s claims and in favor of Citibank on three counterclaims.
The court entered judgment for Citibank on the counterclaims in the
amount of $431 million, which is accruing interest. On December 22, 2011,
the intermediate appellate court unanimously affirmed the judgment.
On January 23, 2012, Bondi petitioned the New Jersey Supreme Court to
review the decisions of the lower courts. Additional information concerning
this matter is publicly available in court filings under docket number
A-2654-08T2 (N.J. Sup. Ct.).
In addition, prosecutors in Parma and Milan, Italy, have commenced
criminal proceedings against 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. On April 18, 2011, the Milan criminal court acquitted the sole
Citigroup defendant of market-rigging charges. The Milan prosecutors have
appealed part of that judgment and seek administrative remedies against
Citigroup, which may include disgorgement of 70 million Euro and a fine
of 900,000 Euro. Additionally, Bondi has purported to file a civil complaint
against Citigroup in the context of the Parma criminal proceedings, seeking
14 billion Euro in damages. In January 2011, certain Parmalat institutional
investors filed a civil complaint seeking damages of approximately
130 million Euro against Citigroup and other financial institutions.