Citibank 2013 Annual Report Download - page 322

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the Special Inspector General for the Troubled Asset Relief Program, bank
regulators, and other government agencies and authorities, in connection
with various formal and informal (and, in many instances, industry-wide)
inquiries concerning Citigroup’s mortgage-related conduct and business
activities, as well as other business activities affected by the credit crisis. These
business activities include, but are not limited to, Citigroup’s sponsorship,
packaging, issuance, marketing, trading, servicing and underwriting of CDOs
and MBS, and its origination, sale or other transfer, servicing, and foreclosure
of residential mortgages.
Mortgage-Related Litigation and Other Matters
Securities Actions: Beginning in November 2007, Citigroup and Related
Parties were named as defendants in a variety of class and individual
securities actions filed by investors in Citigroup’s equity and debt securities in
state and federal courts relating to the Company’s disclosures regarding its
exposure to subprime-related assets.
Citigroup and Related Parties were named as defendants in the
consolidated putative class action IN RE CITIGROUP INC. SECURITIES
LITIGATION, filed in the United States District Court for the Southern
District of New York. The consolidated amended complaint asserted claims
under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on
behalf of a putative class of purchasers of Citigroup common stock from
January 1, 2004 through January 15, 2009. On November 9, 2010, the court
issued an opinion and order dismissing all claims except those arising out of
Citigroup’s exposure to CDOs for the time period February 1, 2007 through
April 18, 2008. On August 30, 2012, the court entered an order preliminarily
approving the parties’ proposed settlement, under which Citigroup agreed to
pay $590 million in exchange for a release of all claims asserted on behalf
of the settlement class. A fairness hearing was held on April 8, 2013. On
August 1, 2013, the court entered a final order approving the settlement.
Appeals from the final order have been dismissed or voluntarily withdrawn.
Additional information concerning this action is publicly available in court
filings under the consolidated lead docket number 07 Civ. 9901 (S.D.N.Y.)
(Stein, J.), and 13-3531, 13-3539, and 13-3710 (2d Cir.).
Citigroup and Related Parties were named as defendants in the
consolidated putative class action IN RE CITIGROUP INC. BOND
LITIGATION, also filed in the United States District Court for the Southern
District of New York. The consolidated amended complaint asserted claims
under Sections 11, 12 and 15 of the Securities Act of 1933 on behalf of a
putative class of purchasers of $71 billion of debt securities and preferred
stock issued by Citigroup between May 2006 and August 2008. On July 12,
2010, the court issued an opinion and order dismissing plaintiffs’ claims
under Section 12 of the Securities Act of 1933, but denying defendants’
motion to dismiss certain claims under Section 11. On March 25, 2013,
the court entered an order preliminarily approving the parties’ proposed
settlement, under which Citigroup agreed to pay $730 million in exchange
for a release of all claims asserted on behalf of the settlement class. A fairness
hearing was held on July 23, 2013. On August 20, 2013, the court entered a
final order approving the settlement. In a separate order dated December 19,
2013, the court awarded fees to class counsel. On January 14, 2014, an
objector to the settlement filed a notice of appeal from the fee award.
Additional information concerning this action is publicly available in court
filings under the consolidated lead docket number 08 Civ. 9522 (S.D.N.Y.)
(Stein, J.).
Citigroup and Related Parties also have been named as defendants in
a variety of other putative class actions and individual actions arising out
of similar facts to those alleged in the actions described above. Many of
these matters have been dismissed or settled. These actions assert a wide
range of claims, including claims under the federal securities laws, foreign
securities laws, ERISA, and state law. Additional information concerning
certain of these actions is publicly available in court filings under the docket
numbers 09 Civ. 7359 (S.D.N.Y.) (Stein, J.), 10 Civ. 9646 (S.D.N.Y.) (Stein, J.).
11 Civ. 7672 (S.D.N.Y.) (Koeltl, J.), 12 Civ. 6653 (S.D.N.Y.) (Stein, J.) and
13-4488, 13-4504 (2d Cir.).
Beginning in November 2007, certain Citigroup affiliates also have
been named as defendants arising out of their activities as underwriters
of securities in actions brought by investors in securities issued by public
companies adversely affected by the credit crisis. Many of these matters
have been dismissed or settled. As a general matter, issuers indemnify
underwriters in connection with such claims, but in certain of these matters
Citigroup affiliates are not being indemnified or may in the future cease to be
indemnified because of the financial condition of the issuer.
Regulatory Actions: On October 19, 2011, in connection with its industry-
wide investigation concerning CDO-related business activities, the SEC filed
a complaint in the United States District Court for the Southern District of
New York regarding Citigroup’s structuring and sale of the Class V Funding
III CDO (Class V). On the same day, the SEC and Citigroup announced a
settlement of the SEC’s claims, subject to judicial approval, and the SEC filed
a proposed final judgment pursuant to which Citigroup’s U.S. broker-dealer
Citigroup Global Markets Inc. (CGMI) agreed to disgorge $160 million
and to pay $30 million in prejudgment interest and a $95 million penalty.
On November 28, 2011, the court issued an order refusing to approve the
proposed settlement and ordering trial to begin on July 16, 2012. The
parties appealed from this order to the United States Court of Appeals for the
Second Circuit which, on March 15, 2012, granted a stay of the district court
proceedings pending resolution of the appeals. The parties have fully briefed
their appeals, and the Second Circuit held oral argument on February 8,
2013. Additional information concerning this action is publicly available in
court filings under the docket numbers 11 Civ. 7387 (S.D.N.Y.) (Rakoff, J.)
and 11-5227 (2d Cir.).