Citibank 2012 Annual Report Download - page 305

283
in these actions generally seek rescission of their investments, recovery of
their investment losses, or other damages. Other purchasers of MBS and
CDOs sold or underwritten by Citigroup have threatened to file additional
suits, for some of which Citigroup has agreed to toll (extend) the statute
of limitations.
The filed actions generally are in the early stages of proceedings, and
certain of the actions or threatened actions have been resolved through
settlement or otherwise. The aggregate original purchase amount of the
purchases at issue in the filed suits is approximately $10.8 billion, and
the aggregate original purchase amount of the purchases covered by
tolling agreements with investors threatening litigation is approximately
$6.4 billion. The largest MBS investor claim against Citigroup and Related
Parties, as measured by the face value of purchases at issue, has been asserted
by the Federal Housing Finance Agency, as conservator for Fannie Mae
and Freddie Mac. This suit was filed on September 2, 2011, and has been
coordinated in the United States District Court for the Southern District of
New York with 15 other related suits brought by the same plaintiff against
various other financial institutions. Motions to dismiss in the coordinated
suits have been denied in large part, and discovery is proceeding. An
interlocutory appeal currently is pending in the United States Court of
Appeals for the Second Circuit on issues common to all of the coordinated
suits. Additional information concerning certain of these actions is publicly
available in court filings under the docket numbers 11 Civ. 6196 (S.D.N.Y.)
(Cote, J.), 12 Civ. 4000 (S.D.N.Y.) (Swain, J.), 12 Civ. 00790 (M.D. Al.)
(Watkins, C.J.), 12 Civ. 4354 (C.D. Cal.) (Pfaezler, J.), 650212/12 (N.Y.
Sup. Ct.) (Oing, J.), 652607/2012 (N.Y. Sup. Ct.) (Schweitzer, J.), and
CGC-10-501610 (Cal. Super. Ct.) (Kramer, J.).
In addition to these actions, various parties to MBS securitizations and
other interested parties have asserted that certain Citigroup affiliates breached
representations and warranties made in connection with mortgage loans sold
into securitization trusts (private-label securitizations). In connection with
such assertions, Citi has received significant levels of inquiries and demands
for loan files, as well as requests to toll (extend) the applicable statutes of
limitation for, among others, representation and warranty claims relating to
its private-label securitizations. These inquiries, demands and requests have
come from trustees of securitization trusts and others.
Among these requests, in December 2011, Citigroup received a letter from the
law firm Gibbs & Bruns LLP, which purports to represent a group of investment
advisers and holders of MBS issued or underwritten by Citigroup affiliates.
Through that letter and subsequent discussions, Gibbs & Bruns LLP has asserted
that its clients collectively hold certificates in 87 MBS trusts purportedly issued
and/or underwritten by Citigroup affiliates, and that Citigroup affiliates have
repurchase obligations for certain mortgages in these trusts.
Citi has also received repurchase claims for breaches of representations
and warranties related to private-label securitizations. These claims have
been received at an unpredictable rate, although the number of claims
increased substantially during 2012 and is expected to remain elevated,
particularly given the level of inquiries, demands and requests noted
above. Upon receipt of a claim, Citi typically requests that it be provided
with the underlying detail supporting the claim; however, to date, Citi has
received little or no response to these requests for information. As a result,
the vast majority of the repurchase claims received on Citi’s private-label
securitizations remain unresolved. Citi expects unresolved repurchase claims
for private-label securitizations to continue to increase because new claims
and requests for loan files continue to be received, while there has been little
progress to date in resolving these repurchase claims.
Independent Foreclosure Review: On January 7, 2013, Citi, along with
other major mortgage servicers operating under consent orders dated April
13, 2011 with the Federal Reserve Board and the Office of the Comptroller
of the Currency (OCC), entered into a settlement agreement with those
regulators to modify the requirements of the independent foreclosure
review mandated by the consent orders. Under the settlement, Citi agreed
to pay approximately $305 million into a qualified settlement fund and to
offer $487 million of mortgage assistance to borrowers in accordance with
agreed criteria. Upon completion of Citi’s payment and mortgage assistance
obligations under the agreement, the Federal Reserve Board and the OCC
have agreed to deem the requirements of the independent foreclosure review
under the consent orders to be satisfied.
Abu Dhabi Investment Authority
In 2010, Abu Dhabi Investment Authority (ADIA) commenced an arbitration
against Citigroup and Related Parties alleging statutory and common
law claims in connection with its $7.5 billion investment in Citigroup in
December 2007. ADIA sought rescission of the investment agreement or, in
the alternative, more than $4 billion in damages. Following a hearing in
May 2011 and post-hearing proceedings, on October 14, 2011, the arbitration
panel issued a final award and statement of reasons finding in favor of
Citigroup on all claims asserted by ADIA. On January 11, 2012, ADIA filed a
petition to vacate the award in New York state court. On January 13, 2012,
Citigroup removed the petition to the United States District Court for the
Southern District of New York. On April 3, 2012, Citigroup filed an opposition
to ADIA’s petition and a cross-petition to confirm the award. Both ADIA’s
petition and Citigroup’s cross-petition are pending. Additional information
concerning this matter is publicly available in court filings under the docket
number 12 Civ. 283 (S.D.N.Y.) (Daniels, J.).
Alternative Investment Fund–Related Litigation and Other
Matters
The SEC is investigating the management and marketing of the ASTA/
MAT and Falcon funds, alternative investment funds managed and
marketed by certain Citigroup affiliates that suffered substantial losses
during the credit crisis. In addition to the SEC inquiry, on June 11, 2012,
the New York Attorney General served a subpoena on a Citigroup affiliate
seeking documents and information concerning certain of these funds,
and on August 1, 2012, the Massachusetts Attorney General served a Civil
Investigative Demand on a Citigroup affiliate seeking similar documents and
information. Citigroup is cooperating fully with these inquiries.
In October 2012, Citigroup Alternative Investments LLC (CAI) was
named as a defendant in a putative class action lawsuit filed on behalf of
investors in CSO Ltd., CSO US Ltd., and Corporate Special Opportunities Ltd.,
whose investments were managed indirectly by a CAI affiliate. The plaintiff