Citibank 2013 Annual Report Download - page 325

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Lehman Brothers Bankruptcy Proceedings
Beginning in September 2010, Citigroup and Related Parties have been
named as defendants in various adversary proceedings and claim objections
in the Chapter 11 bankruptcy proceedings of Lehman Brothers Holdings
Inc. (LBHI) and the liquidation proceedings of Lehman Brothers Inc. (LBI).
Information concerning the bankruptcy proceedings is publicly available
under the docket numbers 08-13555 and 08-01420 (Bankr. S.D.N.Y.)
(Chapman, J.).
On February 8, 2012, Citigroup and Related Parties were named as
defendants in an adversary proceeding asserting objections to proofs of
claim totaling approximately $2.6 billion filed by Citibank, N.A. and its
affiliates, and claims under federal bankruptcy and state law to recover
$2 billion deposited by LBHI with Citibank, N.A. against which Citibank,
N.A. asserts a right of setoff. Plaintiffs also seek avoidance of a $500 million
transfer and an amendment to a guarantee in favor of Citibank, N.A.
and other relief. Plaintiffs filed an amended complaint on November 16,
2012, asserting additional claims. On May 14, 2013, the court approved an
agreement by the parties pursuant to which Citibank, N.A. agreed to pay
plaintiffs approximately $167 million resolving, in part, one of plaintiffs’
claims. Discovery concerning the remaining claims is ongoing. Additional
information concerning this adversary proceeding is publicly available
in court filings under the docket numbers 12-01044 (Bankr. S.D.N.Y.)
(Chapman, J.) and 08-13555 (Bankr. S.D.N.Y.) (Chapman, J.).
On May 6, 2013, Citibank, N.A. filed a complaint in the United States
District Court for the Southern District of New York against Barclays Bank,
PLC (Barclays) based on an indemnification agreement pursuant to which
Barclays agreed to indemnify Citibank, N.A. for losses incurred as a result
of Citibank, N.A.’s provision of foreign exchange clearing and settlement
services to LBI in September 2008. Citibank, N.A. seeks to recover its
remaining principal claims against LBI in the amount of $91 million, as
well as attorneys’ fees, statutory prejudgment interest, and funding losses. Citi
is carrying a receivable in Other assets related to the expected recovery under
the indemnity based on its expectation that it will recover from Barclays
on the claims. Additional information relating to this action is publicly
available in court filings under the docket number 13 Civ. 3063 (S.D.N.Y.)
(Schofield, J.).
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 appealed from the
entry of the judgment. On May 31, 2013, the United States Court of Appeals
for the Second Circuit vacated the November 2010 jury verdict in favor of
Citigroup and ordered that the case be retried. A retrial is scheduled to begin
on July 7, 2014. Additional information relating to this action is publicly
available in court filings under the docket numbers 09 Civ. 10459 (S.D.N.Y.)
(Rakoff, J.) and 11-0126-cv (2d Cir.).
In August and September 2013, the plaintiffs in the New York proceedings,
together with their affiliates and principal, filed fraud and negligent
misrepresentation claims arising out of the EMI auction in the High Court
of Justice, Queen’s Bench Division, Manchester District Registry Mercantile
Court in Manchester, England, against certain Citigroup affiliates. The
cases have since been transferred to the High Court of Justice, Queen’s
Bench Division, Commercial Court in London. The plaintiffs have elected
to proceed with only one of the cases. Additional information relating to the
surviving action is available in court filings under the caption Terra Firma
Investments (GP) 2 Ltd. & Ors v Citigroup Global Markets Ltd.& Ors
(Claim No. 3MA40121).
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. On March 28, 2013, the United States District Court for the
Southern District of New York granted defendants’ motion for summary
judgment dismissing all remaining claims asserted by seven Norwegian
municipalities. Plaintiffs appealed this ruling, and on February 18, 2014,
the United States Court of Appeals for the Second Circuit issued a summary
order affirming the dismissal. Additional information related to this action
is publicly available in court filings under the docket numbers 09 Civ. 7058
(S.D.N.Y.) (Marrero, J.) and 13-1188-cv (2nd Cir.).
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 August 2, 2013, the Litigation Trustee, as
successor plaintiff to the Official Committee of Unsecured Creditors, filed
a fifth amended complaint in the adversary proceeding KIRSCHNER v.
FITZSIMONS, ET AL. The complaint seeks to avoid and recover as actual
fraudulent transfers the transfers of Tribune stock that occurred as a part of
the leveraged buyout. Several Citigroup affiliates are named as “Shareholder
Defendants” and are alleged to have tendered Tribune stock to Tribune as
a part of the buyout. CGMI also has been named in a separate action as
a defendant in connection with its role as advisor to Tribune. 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.) (Sullivan, J.), and 12 MC 2296 (S.D.N.Y.) (Sullivan, J.).