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Shareholder Derivative Action
Citigroup, Inc. (NYSE: C)
Link to Complaints:
Chimicles & Tikellis LLP has filed shareholder lawsuits, derivatively on behalf of Citigroup, Inc. ("Citigroup"), in the Court of Chancery of the State of Delaware, for wrongdoing stemming from Citigroup's financial and business exposure to subprime loans and the subprime mortgage crises. These lawsuits allege wrongdoing by several of Citigroup's current and former officers and directors, for, among other things, breaches of fiduciary duties, waste of corporate assets and unjust enrichment. These actions allege that the wrongdoing occurred from at least as early as January 1, 2007 through present ("Relevant Time Period"). The wrongdoing stems from: Defendants' failure to adequately oversee Citigroup's business in accordance with their fiduciary duties owed to Citigroup; Defendants' failure to fulfill its duty of disclosure by failing to adequately oversee and/or implement policies, procedures, and rules to ensure compliance with laws that require the dissemination of accurate financial statements; Defendants' exposing the Company to liability for state and federal law violations, including causing it to be a target of investigations by the SEC; and Defendants' misappropriating and unjustly enriching themselves and profiting from illegal insider trading in Citigroup stock. In sum, Defendants' actions were not a good faith exercise of prudent business judgment to protect and promote the Company's corporate interests.
Starting at least in 2004, Citigroup, Inc. ("Citigroup") became highly involved in collateralized debt obligations ("CDOs"), which are repackaged pools of lower-rated securities backed by sub-prime loans into pieces with different levels of risk and return. Citigroup also invested billions of dollars of sub-prime loans, and sub-prime residential mortgage backed security ("RMBS") collateral for its CDO portfolios, and placed such under-performing and/or non-performing assets in off-balance sheet structured investment vehicles ("SIVs").
With the subprime mortgage debacle and credit crisis gathering steam starting in at least mid-2006, certain current and former officers and directors of Citigroup ("Defendants") caused Citigroup to subject itself to dangerously high levels of credit exposure through its involvement with CDOs. Citigroup failed to adequately reserve against these risks and failed to fully disclose the circumstances and ramifications of Citigroup's involvement in CDOs. Instead of heeding the multitude of red flags concerning the financial viability and stability of the subprime market, which in turn exposed Citigroup's business to tremendous financial exposure, write-downs and losses, Defendants caused Citigroup to purchase billions worth of subprime loans for use in future CDOs and to make a multitude of unsupported and reckless statements concerning Citigroup's "record growth" and financial condition.
Defendants' façade about the financial condition of Citigroup started to crumble first with an October 1, 2007 announcement of a $1.4 billion write-down of Citigroup's leveraged loan commitments, and then with an October 15, 2007 announcement of third fiscal quarter earnings that were 60% lower than the Company's prior year results.
Then, on Sunday, November 4, when Defendant Charles O. Prince ("Prince"), Citigroup's then Chairman and Chief Executive Officer ("CEO"), "retired" immediately following the Company's announcements that it would take an additional write-down of $8 billion to $11 billion in previously undisclosed and unaccounted for losses related to its subprime secured assets and that it was further revising, downward, its earlier reported third quarter results by $166 million.
Most recently, on January 15, 2008, Citigroup announced $18.1 billion in write-downs for the fourth quarter and a $9.8 billion net loss for the period. This $1.99 per share loss was significantly worse than the $1.03 consensus analyst estimate. Citigroup also announced it will slash its quarterly dividend by 41%, to 32 cents a share from 54 cents a share.
If you wish to discuss this Action further, have any questions concerning your rights or interests, or need additional information on this Action please contact:
Pamela S. Tikellis - E-Mail: pst@chimicles.com
Meghan A. Adams - E-Mail: maa@chimicles.com
CHIMICLES & TIKELLIS LLP
One Rodney Square
P.O. Box 1035
Wilmington, Delaware 19899
(302) 656-2500
(302) 656-9053 (fax)
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