Citibank 2014 Annual Report Download - page 310

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Citigroup and Related Parties have been named as defendants in a
putative class action lawsuit filed in October 2012 on behalf of investors
in CSO Ltd., CSO US Ltd., and Corporate Special Opportunities Ltd., whose
investments were managed indirectly by a Citigroup affiliate. Plaintiffs
assert a variety of state common law claims, alleging that they and other
investors were misled into investing in the funds and, later, not redeeming
their investments. The complaint seeks to recover more than $400 million on
behalf of a putative class of investors. Additional information concerning this
action is publicly available in court filings under the docket number 12-cv-
7717 (S.D.N.Y.) (Castel, J.).
Auction Rate Securities-Related Litigation and
Other Matters
Citigroup and Related Parties have been named as defendants in numerous
actions and proceedings brought by Citigroup shareholders and purchasers
or issuers of ARS and an issuer of variable rate demand obligations, asserting
federal and state law claims arising from the collapse of the market in 2008,
which plaintiffs contend Citigroup and other ARS underwriters and broker-
dealers foresaw or should have foreseen, but failed adequately to disclose.
Many of these matters have been dismissed or settled. Most of the remaining
matters are in arbitrations pending before FINRA.
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) and
Lehman Brothers Finance AG, a/k/a Lehman Brothers Finance SA (LBF).
Additional information concerning these actions is publicly available in
court filings under the docket numbers 08-13555, 08-01420, and 09-10583
(Bankr. S.D.N.Y.) (Chapman, J.).
On February 8, 2012, Citibank, N.A. and certain Citigroup affiliates 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
those 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 amended complaints on November 16, 2012,
January 29, 2014, and December 9, 2014, asserting additional claims and
factual allegations, and amending certain previously asserted claims.
Discovery is ongoing. Additional information concerning this action is
publicly available in court filings under the docket numbers 12-01044 and
08-13555 (Bankr. S.D.N.Y.) (Chapman, J.).
On July 21, 2014, an adversary proceeding was filed against Citibank,
N.A., Citibank Korea Inc., and Citigroup Global Markets Ltd., asserting
that defendants improperly have withheld termination payments under
certain derivatives contracts. An amended complaint was filed on August
6, 2014, and defendants filed an answer on October 6, 2014. Plaintiffs seek
to recover approximately $70 million, plus interest. Discovery is ongoing.
Additional information concerning this action is publicly available in court
filings under the docket numbers 09-10583 and 14-02050 (Bankr. S.D.N.Y.)
(Chapman, 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. On March 7, 2014, the parties stipulated
to the dismissal of all remaining claims in the action, without prejudice to
plaintiffs’ rights to re-file those claims in England. 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-cv (2d Cir.).
In August and September 2013, 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. On March 7, 2014, the parties to the
separate proceedings brought by Terra Firma in 2013 before the High Court
of Justice, Queen’s Bench Division, Commercial Court in London consented
to the service by plaintiffs of an Amended Claim Form incorporating the
claims that would have proceeded to trial in the United States District Court
for the Southern District of New York in July 2014 had the New York action
not been dismissed. The Amended Claim Form was served on March 10,
2014, and discovery is ongoing. A trial is scheduled to begin in 2016.
Additional information concerning this action is publicly available in court
filings under the claim number Terra Firma Investments (GP) 2 Ltd. &
Ors v Citigroup Global Markets Ltd. & Ors (2014 Folio 267).
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.
Several Citigroup affiliates are named as defendants in certain actions
brought by Tribune noteholders, also seeking to recover the transfers of
Tribune stock that occurred as a part of the leveraged buyout, as alleged
state-law constructive fraudulent conveyances. Finally, Citigroup Global
Markets Inc. (CGMI) has been named in a separate action as a defendant in