Citibank 2012 Annual Report Download - page 309

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On November 27, 2012, the court entered an order granting preliminary
approval of the proposed class settlements and provisionally certified two
classes for settlement purposes only. The court scheduled a final approval
hearing for September 12, 2013. Several large merchants and associations
have stated publicly that they intend to object to or opt out of the settlement,
and have appealed from the court’s preliminary approval of the proposed
class settlements.
Visa and MasterCard have also entered into a settlement agreement
with merchants that filed individual, non-class actions. While Citigroup
and Related Parties are not parties to the individual merchant non-class
settlement agreement, they are contributing to that settlement, and
the agreement provides for a release of claims against Citigroup and
Related Parties.
Additional information concerning these consolidated actions is publicly
available in court filings under the docket number MDL 05-1720 (E.D.N.Y.)
(Gleeson, J.).
Regulatory Review of Consumer “Add-On” Products
Certain of Citi’s consumer businesses, including its Citi-branded and retail
services cards businesses, offer or have in the past offered or participated
in the marketing, distribution, or servicing of products, such as payment
protection and identity monitoring, that are ancillary to the provision of
credit to the consumer (add-on products). These add-on products have been
the subject of enforcement actions against other institutions by regulators,
including the Consumer Financial Protection Bureau (CFPB), the OCC, and
the FDIC, that have resulted in orders to pay restitution to customers and
penalties in substantial amounts. Certain state attorneys general also have
filed industry-wide suits under state consumer protection statutes, alleging
deceptive marketing practices in connection with the sale of payment
protection products and demanding restitution and statutory damages for in-
state customers. In light of the current regulatory focus on add-on products
and the actions regulators have taken in relation to other credit card issuers,
one or more regulators may order that Citi pay restitution to customers
and/or impose penalties or other relief arising from Citi’s marketing,
distribution, or servicing of add-on products.
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, N.A. on three
counterclaims. Parmalat has exhausted all appeals, and the judgment is now
final. Additional information concerning this matter is publicly available in
court filings under docket number A-2654-08T2 (N.J. Sup. Ct.).
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, 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, the Parmalat
administrator filed a purported civil complaint against Citigroup in the context
of the Parma criminal proceedings, which seeks 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.
Allied Irish Bank Litigation
In 2003, Allied Irish Bank (AIB) filed a complaint in the United States District
Court for the Southern District of New York seeking to hold Citibank, N.A.
and Bank of America, N.A., 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.
AIB seeks compensatory damages of approximately $500 million, plus
punitive damages, from Citibank, N.A. and Bank of America, N.A. collectively.
In 2006, the court granted in part and denied in part defendants’ motion
to dismiss. In 2009, AIB filed an amended complaint. In 2012, the parties
completed discovery and the court granted Citibank, N.A.’s motion to strike
AIB’s demand for a jury trial. Citibank, N.A. also filed a motion for summary
judgment, which is pending. AIB has announced a settlement with Bank
of America, N.A. for an undisclosed amount, leaving Citibank, N.A. as the
sole remaining defendant. Additional information concerning this matter
is publicly available in court filings under docket number 03 Civ. 3748
(S.D.N.Y.) (Batts, J.).
Settlement Payments
Payments required in settlement agreements described above have been
made or are covered by existing litigation accruals.
* * *
Additional matters asserting claims similar to those described above may be
filed in the future.