Citibank 2012 Annual Report Download - page 307

285
Terra Firma Litigation
In December 2009, the general partners of two related private equity funds
filed a complaint in New York state court, subsequently removed to the
United States District Court for the Southern District of New York, asserting
multi-billion-dollar fraud and other common law claims against certain
Citigroup affiliates arising out of the May 2007 auction of the music
company EMI, in which Citigroup acted as advisor to EMI and as a lender to
plaintiffs’ acquisition vehicle. Following a jury trial, a verdict was returned
in favor of Citigroup on November 4, 2010. Plaintiffs have appealed the
judgment with respect to certain of their claims to the United States Court
of Appeals for the Second Circuit. Argument was held on October 4, 2012,
and the matter is pending. Additional information concerning this action is
publicly available in court filings under the docket numbers 09 Civ. 10459
(S.D.N.Y.) (Rakoff, J.) and 11-0126 (2d Cir.).
Terra Securities–Related Litigation
Certain Citigroup affiliates have been named as defendants in an action
brought by seven Norwegian municipalities, asserting claims for fraud and
negligent misrepresentation arising out of the municipalities’ purchase
of fund-linked notes acquired from the now-defunct securities firm, Terra
Securities, which in turn acquired those notes from Citigroup. Plaintiffs
seek approximately $120 million in compensatory damages, plus punitive
damages. Defendants’ motion for summary judgment is pending. Additional
information related to this action is publicly available in court filings under
the docket number 09 Civ. 7058 (S.D.N.Y.) (Marrero, J.).
Tribune Company Bankruptcy
Certain Citigroup affiliates have been named as defendants in adversary
proceedings related to the Chapter 11 cases of Tribune Company (Tribune)
filed in the United States Bankruptcy Court for the District of Delaware,
asserting claims arising out of the approximately $11 billion leveraged
buyout of Tribune in 2007. On July 23, 2012, the Bankruptcy Court
confirmed the Fourth Amended Joint Plan of Reorganization, which provides
for releases of claims against Citigroup, other than those against CGMI
relating to its role as advisor to Tribune. Certain Citigroup affiliates also have
been named as defendants in actions brought by Tribune creditors alleging
state law constructive fraudulent conveyance claims. These matters are
pending in the United States District Court for the Southern District of New
York as part of a multi-district litigation. Additional information concerning
these actions is publicly available in court filings under the docket numbers
08-13141 (Bankr. D. Del.) (Carey, J.), 11 MD 02296 (S.D.N.Y.) (Pauley, J.),
and 12 MC 2296 (S.D.N.Y.) (Pauley, J.).
Interbank Offered Rates–Related Litigation and Other
Matters
Regulatory Actions: Government agencies in the U.S., including the
Department of Justice, the Commodity Futures Trading Commission, the
SEC, and a consortium of state attorneys general, as well as agencies in
other jurisdictions, including the European Commission, the U.K. Financial
Services Authority, the Japanese Financial Services Agency (JFSA), the
Canadian Competition Bureau, the Swiss Competition Commission and the
Monetary Authority of Singapore, are conducting investigations or making
inquiries regarding submissions made by panel banks to bodies that publish
various interbank offered rates and other benchmark rates. As members of
a number of such panels, Citigroup subsidiaries have received requests for
information and documents. Citigroup is cooperating with the investigations
and inquiries and is responding to the requests.
On December 16, 2011, the JFSA took administrative action against
Citigroup Global Markets Japan Inc. (CGMJ) for, among other things,
certain communications made by two CGMJ traders about the Euroyen
Tokyo interbank offered rate (TIBOR) and the Japanese yen London
interbank offered rate (LIBOR). The JFSA issued a business improvement
order and suspended CGMJ’s trading in derivatives related to yen LIBOR
and Euroyen and yen TIBOR from January 10 to January 23, 2012. On the
same day, the JFSA also took administrative action against Citibank Japan
Ltd. (CJL) for conduct arising out of CJL’s retail business and also noted that
the communications made by the CGMJ traders to employees of CJL about
Euroyen TIBOR had not been properly reported to CJL’s management team.
Antitrust and Other Litigation: Citigroup and Citibank, N.A., along with
other U.S. Dollar (USD) LIBOR panel banks, are defendants in a multi-
district litigation (MDL) proceeding before Judge Buchwald in the United
States District Court for the Southern District of New York captioned IN
RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION,
appearing under docket number 1:11-md-2262 (S.D.N.Y.). Judge Buchwald
has appointed interim lead class counsel for, and consolidated amended
complaints have been filed on behalf of, three separate putative classes of
plaintiffs: (i) over-the-counter (OTC) purchasers of derivative instruments
tied to USD LIBOR; (ii) purchasers of exchange-traded derivative instruments
tied to USD LIBOR; and (iii) indirect OTC purchasers of U.S. debt securities.
Each of these putative classes alleges that the panel bank defendants
conspired to suppress USD LIBOR in violation of the Sherman Act and/or
the Commodity Exchange Act, thereby causing plaintiffs to suffer losses on
the instruments they purchased. Also consolidated into the MDL proceeding
are individual civil actions commenced by various Charles Schwab entities
alleging that the panel bank defendants conspired to suppress the USD LIBOR
rates in violation of the Sherman Act, the Racketeer Influenced and Corrupt
Organizations Act (RICO), and California state law, causing the Schwab
entities to suffer losses on USD LIBOR-linked financial instruments they
owned. Plaintiffs in these actions seek compensatory damages and restitution
for losses caused by the alleged violations, as well as treble damages under
the Sherman Act. The Schwab and OTC plaintiffs also seek injunctive relief.