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C » Topics » Subprime Mortgage-Related Litigation and Other Matters

This excerpt taken from the C 10-Q filed Nov 6, 2009.

Subprime Mortgage—Related Litigation and Other Matters

        Securities Actions.    On July 22, 2009, plaintiffs in BRECHER, ET AL. v. CGMI, ET AL. voluntarily dismissed the claims against the individual defendants and moved to remand the remaining action against Citigroup, CGMI, and the Personnel and Compensation Committee to state court. On September 8, 2009, the United States District Court for the Southern District of California ordered that defendants show cause as to why there was federal jurisdiction over the case. On September 17, 2009, defendants responded to the district court's order.

        On August 7, 2009, the Judicial Panel on Multidistrict Litigation transferred BRECHER, ET AL. v. CITIGROUP INC., ET AL. to the Southern District of New York for coordination with IN RE CITIGROUP INC. SECURITIES LITIGATION.

        On August 19, 2009, KOCH, ET AL. v. CITIGROUP INC., ET AL., a putative class action, was filed in the United States District Court for the Southern District of California on behalf of participants in Citigroup's Voluntary FA Capital Accumulation Program ("FA CAP Program") against various defendants, including Citigroup and CGMI, asserting claims under the Securities Act of 1933, the Securities Exchange Act of 1934, and Minnesota state law in connection with plaintiffs' acquisition of certain securities through the FA CAP Program. On September 30, 2009, the Judicial Panel on Multidistrict Litigation conditionally transferred KOCH to the United States District Court for the Southern District of New York as a potential tag-along to IN RE CITIGROUP INC. SECURITIES LITIGATION. On October 8, 2009, a consolidated amended complaint was filed in BRECHER, ET AL. v. CITIGROUP INC., ET AL. in the United States District Court for the Southern District of New York, asserting claims under the federal securities laws and Minnesota and California state law. The complaint purports to consolidate the similar claims asserted in KOCH.

        On August 31, 2009, ASHER, ET AL. v. CITIGROUP INC., ET AL. and PELLEGRINI, ET AL. v. CITIGROUP INC., ET AL. were consolidated with IN RE CITIGROUP INC. BOND LITIGATION.

        On October 14, 2009, INTERNATIONAL FUND MANAGEMENT S.A., ET AL. v. CITIGROUP INC., ET AL. was filed by several foreign investment funds and fund management companies and the City of Richmond in the United States District Court for the Southern District of New York, asserting, among other claims, claims under the Securities Exchange Act of 1934 against various defendants, including Citigroup and several current and former Citigroup executives. The claims asserted in this action are similar to those asserted in IN RE CITIGROUP INC. SECURITIES LITIGATION.

        Derivative Actions.    On August 25, 2009, the United States District Court for the Southern District of New York dismissed without prejudice the complaint in IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION for failure to make a pre-suit demand on the Board of Directors and failure to plead demand futility. On September 18, 2009, plaintiffs filed a motion for leave to amend the complaint.

        Citigroup has received letters on behalf of purported shareholders demanding that the Board of Directors take remedial action, including the filing of legal claims, with respect to certain of the matters alleged in the subprime mortgage—related securities and derivative litigations, among other matters. The Board has formed a committee to consider the demands asserted in the letters.

        ERISA Actions.    On August 31, 2009, the United States District Court for the Southern District of New York dismissed the complaint in IN RE CITIGROUP ERISA LITIGATION for failure to state a claim that defendants breached their fiduciary duties by offering Citigroup stock as an investment option in the ERISA plans and entered judgment in favor of defendants. On September 8, 2009, plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit.

        Other Matters.    Underwriting Actions. American Home Mortgage. On July 27, 2009, UTAH RETIREMENT SYSTEMS v. STRAUSS, ET AL. was filed in the United States District Court for the Eastern District of New York asserting, among other claims, claims under the Securities Act of 1933 and Utah state law arising out of an offering of American Home Mortgage common stock underwritten by CGMI.

        On July 31, 2009, the United States District Court for the Eastern District of New York entered an order preliminarily approving settlements reached with all defendants (including Citigroup and CGMI) in IN RE AMERICAN HOME MORTGAGE SECURITIES LITIGATION.

        AIG.    On August 5, 2009, the underwriter defendants, including CGMI and CGML, moved to dismiss the consolidated amended complaint in IN RE AMERICAN INTERNATIONAL GROUP, INC. 2008 SECURITIES LITIGATION.

        Discrimination in Lending Actions. On September 21, 2009, the United States District Court for the Central District of California denied defendant CitiMortgage's motion for summary judgment and granted its motion to strike the jury demand in NAACP v. AMERIQUEST MORTGAGE CO., ET AL.

        Public Nuisance and Related Actions. On August 7, 2009, the City of Cleveland dismissed, without prejudice, its claims against CitiFinancial and CitiMortgage in CITY OF CLEVELAND v. JP MORGAN CHASE BANK, N.A., ET AL.

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        Counterparty Actions. On October 7, 2009, defendants filed a motion to dismiss the complaint in AMBAC CREDIT PRODUCTS, LLC v. CITIGROUP INC., ET AL.

        Governmental and Regulatory Matters.    Citigroup and certain of its affiliates and current and former employees are subject to formal and informal investigations, as well as subpoenas and/or requests for information, from various governmental and self-regulatory agencies relating to subprime mortgage—related activities. Citigroup and its affiliates are cooperating fully and are engaged in efforts to resolve certain of these matters.

This excerpt taken from the C 8-K filed Oct 13, 2009.

Subprime Mortgage—Related Litigation and Other Matters

 

Beginning in November 2007, Citigroup and a number of current and former officers, directors, and employees have been named as defendants in numerous complaints brought by Citigroup shareholders, investors,counterparties and others concerning Citigroup’s activities relating to subprime mortgages, including Citigroup’s exposure to collateralized debt obligations (“CDOs”), mortgage-backed securities (“MBS”), and structured investment vehicles (“SIVs”), Citigroup’s underwriting activity for subprime mortgage lenders, and Citigroup’s more general involvement in subprime- and credit-related activities.

 

Securities Actions: Four putative class actions were filed in the Southern District of New York by Citigroup shareholders alleging violations of Sections 10 and 20 of the Securities Exchange Act of 1934. On August 19, 2008, these actions were consolidated under the caption IN RE CITIGROUP SECURITIES LITIGATION, and lead plaintiff and counsel were appointed. Plaintiffs’ consolidated amended class action

 

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complaint was filed on December 1, 2008, and alleges, among other things, that Citigroup’s stock price was artificially inflated as a result of purportedly misleading disclosures concerning Citigroup’s subprime mortgage—related exposures.

 

On September 30 and October 28, 2008, Citigroup, certain Citigroup entities, certain current and former directors and officers of Citigroup and Citigroup Funding, Inc., and certain underwriters of Citigroup notes (including CGMI) were named as defendants in two putative class actions filed in New York state court but since removed to the United States District Court for the Southern District of New York. These actions allege violations of Sections 11, 12, and 15 of the Securities Act of 1933, arising out of various offerings of Citigroup notes during 2006, 2007, and 2008. On December 10, 2008, these two actions were consolidated under the caption IN RE CITIGROUP INC. BOND LITIGATION, and lead plaintiff and counsel were appointed. On January 15, 2009, plaintiffs filed a consolidated class action complaint.

 

Derivative Actions: Eleven derivative actions have been filed against various current and former officers and directors of Citigroup alleging mismanagement in connection with subprime mortgage—related exposures. Citigroup is named as a nominal defendant in these actions.

 

On February 5, 2008, four derivative actions filed in Delaware Chancery Court were consolidated under the caption IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION and lead plaintiff and counsel were appointed. On September 15, 2008, the parties stipulated to the filing of the consolidated second amended derivative complaint. Defendants filed motions to dismiss and stay the complaint on November 5, 2008. On February 24, 2009, the court dismissed every claim in the complaint except one, as to which it said that it did not have sufficient information.

 

On August 22, 2008, the five derivative actions filed in the Southern District of New York were consolidated under the caption IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION, and lead plaintiff and counsel were appointed. On November 11, 2008, plaintiffs filed a consolidated complaint, which alleges federal securities fraud and state law violations. Defendants filed a motion to dismiss the complaint on December 23, 2008.

 

Two derivative actions filed in New York state court have been stayed by stipulation between the parties.

 

ERISA Actions: Fourteen putative class actions have been filed in the Southern District of New York asserting claims under the Employee Retirement Income Security Act (“ERISA”) against Citigroup and certain Citigroup employees alleged to have served as ERISA plan fiduciaries. On January 22, 2008, 13 of these actions were consolidated under the caption IN RE CITIGROUP ERISA LITIGATION, and lead plaintiff and counsel were appointed. On December 16, 2008, the fourteenth action was consolidated into this litigation.

 

On September 15, 2008, plaintiffs filed a consolidated amended complaint on behalf of a purported class of participants in Citigroup-sponsored ERISA plans from January 1, 2007 through January 15, 2008. The complaint alleges that defendants offered Citigroup’s common stock as an investment option in the Company’s 401(k) plans when it was no longer prudent to do so, and that defendants failed adequately to disclose Citigroup’s subprime exposure to ERISA plan beneficiaries. Defendants filed a motion to dismiss the complaint on November 21, 2008.

 

This excerpt taken from the C 10-Q filed Aug 7, 2009.

Subprime Mortgage—Related Litigation and Other Matters

        Securities Actions.    On April 17, 2009, a putative class action BRECHER, ET AL. v. CGMI, ET AL. was filed in California state court asserting claims against Citigroup, CGMI, and certain of the Company's current and former directors under California's Business and Professions Code and Labor Code, as well as under California common law, relating to, among other things, losses incurred on common stock awarded to Smith Barney financial advisors in connection with the execution of their employment contracts. On May 19, 2009, an amended complaint was filed. On July 9, 2009, the Judicial Panel on Multidistrict Litigation was notified that BRECHER, ET AL. v. CGMI, ET AL. is a potential tag-along action to IN RE CITIGROUP, INC. SECURITIES LITIGATION. On July 15, 2009, after having removed the case to the United States District Court for the Southern District of California, defendants filed motions to dismiss the complaint and to stay all further proceedings pending resolution of the tag-along petition.

        On May 7, 2009, BUCKINGHAM v. CITIGROUP INC., ET AL. and CHEN v. CITIGROUP INC., ET AL. were consolidated with IN RE CITIGROUP INC. BOND LITIGATION.

        On May 11, 2009, a putative class action ASHER, ET AL. v. CITIGROUP INC., ET AL. was filed in the United States District Court for the Southern District of New York alleging violations of the Securities Act of 1933 in connection with plaintiffs' investments in certain offerings of preferred stock issued by the Company. On May 15, 2009, plaintiffs in IN RE CITIGROUP INC. BOND LITIGATION requested that ASHER and PELLEGRINI v. CITIGROUP INC., ET AL. be consolidated with IN RE CITIGROUP INC. BOND LITIGATION.

        On May 20, 2009, EPIRUS CAPITAL MANAGEMENT, LLC, ET AL. v. CITIGROUP INC., ET AL. was designated as related to IN RE CITIGROUP INC. SECURITIES LITIGATION. On June 10 and June 24, 2009, defendants filed motions to dismiss the verified complaint.

        Derivative Actions.    On July 16, 2009, a derivative lawsuit LERNER v. CITIGROUP INC., ET AL. was filed in New York state court against various current and former officers and directors of Citigroup alleging derivative claims of mismanagement and breach of fiduciary duty in connection with subprime mortgage—related exposures.

These excerpts taken from the C 10-K filed Feb 27, 2009.

Subprime Mortgage–Related Litigation and Other Matters

Beginning in November 2007, Citigroup and a number of current and former officers, directors, and employees have been named as defendants in numerous complaints brought by Citigroup shareholders, investors,


 

230

Table of Contents

 

counterparties and others concerning Citigroup’s activities relating to subprime mortgages, including Citigroup’s exposure to collateralized debt obligations (“CDOs”), mortgage-backed securities (“MBS”), and structured investment vehicles (“SIVs”), Citigroup’s underwriting activity for subprime mortgage lenders, and Citigroup’s more general involvement in subprime- and credit-related activities.

Securities Actions: Four putative class actions were filed in the Southern District of New York by Citigroup shareholders alleging violations of Sections 10 and 20 of the Securities Exchange Act of 1934. On August 19, 2008, these actions were consolidated under the caption IN RE CITIGROUP SECURITIES LITIGATION, and lead plaintiff and counsel were appointed. Plaintiffs’ consolidated amended class action complaint was filed on December 1, 2008, and alleges, among other things, that Citigroup’s stock price was artificially inflated as a result of purportedly misleading disclosures concerning Citigroup’s subprime mortgage–related exposures.

On September 30 and October 28, 2008, Citigroup, certain Citigroup entities, certain current and former directors and officers of Citigroup and Citigroup Funding, Inc., and certain underwriters of Citigroup notes (including CGMI) were named as defendants in two putative class actions filed in New York state court but since removed to the United States District Court for the Southern District of New York. These actions allege violations of Sections 11, 12, and 15 of the Securities Act of 1933, arising out of various offerings of Citigroup notes during 2006, 2007, and 2008. On December 10, 2008, these two actions were consolidated under the caption IN RE CITIGROUP INC. BOND LITIGATION, and lead plaintiff and counsel were appointed. On January 15, 2009, plaintiffs filed a consolidated class action complaint.

Derivative Actions: Eleven derivative actions have been filed against various current and former officers and directors of Citigroup alleging mismanagement in connection with subprime mortgage–related exposures. Citigroup is named as a nominal defendant in these actions.

On February 5, 2008, four derivative actions filed in Delaware Chancery Court were consolidated under the caption IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION and lead plaintiff and counsel were appointed. On September 15, 2008, the parties stipulated to the filing of the consolidated second amended derivative complaint. Defendants filed motions to dismiss and stay the complaint on November 5, 2008. On February 24, 2009, the court dismissed every claim in the complaint except one, as to which it said that it did not have sufficient information.

On August 22, 2008, the five derivative actions filed in the Southern District of New York were consolidated under the caption IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION, and lead plaintiff and counsel were appointed. On November 11, 2008, plaintiffs filed a consolidated complaint, which alleges federal securities fraud and state law violations. Defendants filed a motion to dismiss the complaint on December 23, 2008.

Two derivative actions filed in New York state court have been stayed by stipulation between the parties.

ERISA Actions: Fourteen putative class actions have been filed in the Southern District of New York asserting claims under the Employee Retirement Income Security Act (“ERISA”) against Citigroup and certain Citigroup employees alleged to have served as ERISA plan fiduciaries. On January 22, 2008, 13 of these actions were consolidated under the caption IN RE CITIGROUP ERISA LITIGATION, and lead plaintiff and counsel were

appointed. On December 16, 2008, the fourteenth action was consolidated into this litigation. On September 15, 2008, plaintiffs filed a consolidated amended complaint on behalf of a purported class of participants in Citigroup-sponsored ERISA plans from January 1, 2007 through January 15, 2008. The complaint alleges that defendants offered Citigroup’s common stock as an investment option in the Company’s 401(k) plans when it was no longer prudent to do so, and that defendants failed adequately to disclose Citigroup’s subprime exposure to ERISA plan beneficiaries. Defendants filed a motion to dismiss the complaint on November 21, 2008.

Subprime Mortgage–Related Litigation and Other Matters

Beginning in November 2007, Citigroup and a number of current and former officers, directors, and employees have been named as defendants in numerous complaints brought by Citigroup shareholders, investors,


 

230

Table of Contents

 

counterparties and others concerning Citigroup’s activities relating to subprime mortgages, including Citigroup’s exposure to collateralized debt obligations (“CDOs”), mortgage-backed securities (“MBS”), and structured investment vehicles (“SIVs”), Citigroup’s underwriting activity for subprime mortgage lenders, and Citigroup’s more general involvement in subprime- and credit-related activities.

Securities Actions: Four putative class actions were filed in the Southern District of New York by Citigroup shareholders alleging violations of Sections 10 and 20 of the Securities Exchange Act of 1934. On August 19, 2008, these actions were consolidated under the caption IN RE CITIGROUP SECURITIES LITIGATION, and lead plaintiff and counsel were appointed. Plaintiffs’ consolidated amended class action complaint was filed on December 1, 2008, and alleges, among other things, that Citigroup’s stock price was artificially inflated as a result of purportedly misleading disclosures concerning Citigroup’s subprime mortgage–related exposures.

On September 30 and October 28, 2008, Citigroup, certain Citigroup entities, certain current and former directors and officers of Citigroup and Citigroup Funding, Inc., and certain underwriters of Citigroup notes (including CGMI) were named as defendants in two putative class actions filed in New York state court but since removed to the United States District Court for the Southern District of New York. These actions allege violations of Sections 11, 12, and 15 of the Securities Act of 1933, arising out of various offerings of Citigroup notes during 2006, 2007, and 2008. On December 10, 2008, these two actions were consolidated under the caption IN RE CITIGROUP INC. BOND LITIGATION, and lead plaintiff and counsel were appointed. On January 15, 2009, plaintiffs filed a consolidated class action complaint.

Derivative Actions: Eleven derivative actions have been filed against various current and former officers and directors of Citigroup alleging mismanagement in connection with subprime mortgage–related exposures. Citigroup is named as a nominal defendant in these actions.

On February 5, 2008, four derivative actions filed in Delaware Chancery Court were consolidated under the caption IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION and lead plaintiff and counsel were appointed. On September 15, 2008, the parties stipulated to the filing of the consolidated second amended derivative complaint. Defendants filed motions to dismiss and stay the complaint on November 5, 2008. On February 24, 2009, the court dismissed every claim in the complaint except one, as to which it said that it did not have sufficient information.

On August 22, 2008, the five derivative actions filed in the Southern District of New York were consolidated under the caption IN RE CITIGROUP INC. SHAREHOLDER DERIVATIVE LITIGATION, and lead plaintiff and counsel were appointed. On November 11, 2008, plaintiffs filed a consolidated complaint, which alleges federal securities fraud and state law violations. Defendants filed a motion to dismiss the complaint on December 23, 2008.

Two derivative actions filed in New York state court have been stayed by stipulation between the parties.

ERISA Actions: Fourteen putative class actions have been filed in the Southern District of New York asserting claims under the Employee Retirement Income Security Act (“ERISA”) against Citigroup and certain Citigroup employees alleged to have served as ERISA plan fiduciaries. On January 22, 2008, 13 of these actions were consolidated under the caption IN RE CITIGROUP ERISA LITIGATION, and lead plaintiff and counsel were

appointed. On December 16, 2008, the fourteenth action was consolidated into this litigation. On September 15, 2008, plaintiffs filed a consolidated amended complaint on behalf of a purported class of participants in Citigroup-sponsored ERISA plans from January 1, 2007 through January 15, 2008. The complaint alleges that defendants offered Citigroup’s common stock as an investment option in the Company’s 401(k) plans when it was no longer prudent to do so, and that defendants failed adequately to disclose Citigroup’s subprime exposure to ERISA plan beneficiaries. Defendants filed a motion to dismiss the complaint on November 21, 2008.

EXCERPTS ON THIS PAGE:

10-Q
Nov 6, 2009
8-K
Oct 13, 2009
10-Q
Aug 7, 2009
10-K (2 sections)
Feb 27, 2009

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