According to a press release dated August 13, 2004 the class action suit against Citigroup has been dismissed. This was one of several cases concerning Citigroup's financial relationship with Enron and WorldCom. The central allegations rested on Citigroup's risk management policies disclosed in its public findings. The plaintiffs said Citigroup failed to live up to the policies to an extent constituting fraud, however, the judge saw nothing more than potential mismanagement in the accusations. An allegation of fraud requires references to specific misconduct. Because plaintiffs failed to deliver ample specifics, the action was dismissed.
The original complaint alleges that Citigroup, Inc. violated federal securities laws by misrepresenting Citigroup's potential Enron-related exposure in its 2001 Annual Report and elsewhere, and failing to disclose the true extent of Citigroup's potential legal liability arising out of its "structured finance" dealings with Enron. More specifically, the lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the SEC thereunder and the common law and seeks to recover damages. The complaint further alleges that during the class period, defendants made misrepresentations and/or omissions of material fact, including failing to disclose that Citigroup misrepresented a 1999 transaction with Enron that was structured as commodity trade but served the same purpose as a loan to help Enron keep $125 million in debt off of its books. The complaint alleges that when Wall Street learned about the foregoing on July 23, 2002 after executives of Citigroup and J.P. Morgan Chase testified before the U.S. Senate regarding the transactions at issue, Citigroup stock plummeted $5.04 or 15.73% to close at $27.00, less than half its class period high.