Angry Citi investors to unveil new court complaint
NEW YORK - After Citigroup shares tumbled last year on the bank's subprime mortgage woes, angry investors sued for fraud.
Now, stockholders are due to file a new version of their lawsuit as their losses have become much more stark.
A lot has changed for the worse for Citigroup stockholders since the lawsuit about its subprime debt exposure was first brought in November 2007. The bank's shares are trading at around US$6 apiece compared with US$31 a year ago - even after two government bailouts in the last two months.
The US government this week agreed to inject US$20 billion of capital and shoulder nearly US$250 billion in potential losses on about US$306 billion of the bank's risky assets - after injecting US$25 billion of taxpayer money in October.
A consolidated shareholder complaint in the case is scheduled to be filed in US District Court in Manhattan by Monday. An earlier version accused Citigroup and several individuals, including former CEO Charles Prince, of violating securities law by artificially boosting the bank's stock price by concealing its exposure to subprime-linked debt.
Citigroup believes the lawsuit 'is without merit, and will defend against it vigorously,' company spokesman Mike Hanretta said on Tuesday.
The lawsuit, which seeks class-action status on behalf of a large group of stockholders, could be among the biggest subprime-related cases moving through US courts, given Citigroup's huge stock market declines.
The company was once the biggest US financial institution based on stock market value, but shares have plummeted and are down 54 per cent this month alone. Shareholder lawsuits can take years to litigate, and many are ultimately thrown out by courts or settled.
The lead plaintiff is a group of former employees and directors at closely held Automated Trading Desk (ATD) who received Citigroup stock in exchange for selling their electronic trading firm to the bank in a US$680 million deal announced in July 2007.
Through that deal, group members acquired more than 3.9 million Citigroup shares, which were valued at about US$52 a piece at the time the buyout was being negotiated, according to a January court filing from the ATD plaintiffs.
The group said its members had suffered losses of about US$76.8 million as of January, a figure that is much higher now given Citigroup's stock declines this year.
A lawyer for the shareholders, Ira Press of law firm Kirby McInerney LLP in New York, declined to comment about the specifics of the new court complaint, saying it is still being drafted.
'If last week is any indication, the story may still be unfolding,' he said. 'We are obviously continuously monitoring the unfolding events.'
The original lawsuit was filed by an individual investor. Other shareholders have competed to become lead plaintiff, a role that allows investors to help set strategy in litigation and play a role in any possible settlement talks.
US District Judge Sidney Stein, who is overseeing the case, appointed the ATD Group as the lead plaintiff in August.
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