According to a press release dated March 27, 2008, the Complaint alleges that Citigroup violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by deceiving investors about the investment characteristics of auction rate securities and the auction market in which these securities traded. Auction rate securities are either municipal or corporate debt securities or preferred stocks which pay interest at rates set at periodic "auctions." Auction rate securities generally have long-term maturities or no maturity dates.
The Complaint alleges that, pursuant to uniform sales materials and top-down management directives, Citigroup offered and sold auction rate securities to the public as highly liquid cash-management vehicles and as suitable alternatives to money market mutual funds. According to the Complaint, holders of auction rate securities sold by Citigroup and other broker-dealers have been unable to liquidate their positions in these securities following the decision on February 13, 2008 of all major broker-dealers including Citigroup to "withdraw their support" for the periodic auctions at which the interest rates paid on auction rates securities are set.
The Complaint alleges that Citigroup failed to disclose the following material facts about the auction rate securities it sold to the class: (1) the auction rate securities were not cash alternatives, like money market funds, but were instead, complex, long-term financial instruments with 30 year maturity dates, or longer; (2) the auction rate securities were only liquid at the time of sale because Citigroup and other broker-dealers were artificially supporting and manipulating the auction rate market to maintain the appearance of liquidity and stability; (3) Citigroup and other broker-dealers routinely intervened in auctions for their own benefit, to set rates and prevent all-hold auctions and failed auctions; and (4) Citigroup continued to market auction rate securities as liquid investments after it had determined that it and other broker dealers were likely to withdraw their support for the periodic auctions and that a "freeze" of the market for auction rate securities would result.
A press release dated August 26, 2008 announced that Zwerling, Schachter & Zwerling, LLP ("Zwerling Schachter") filed a Consolidated Amended Complaint (the "Complaint") in In re Citigroup Auction Rate Securities Litigation, Master File No. 08 Civ. 3095 (LTS)(FM). The Complaint is brought on behalf of investors who purchased auction rate securities underwritten and/or sold in auctions managed by defendants Citigroup Inc. (NYSE: C), Citigroup Global Markets, Inc. and Smith Barney ("Citigroup ARS"). The Complaint alleges that from August 1, 2007 through February 11, 2008 (the "Class Period") defendants manipulated the market for Citigroup ARS by fostering the illusion that a valid market existed where buyers and sellers came together, with supply and demand in balance, allowing for the successful completion of auctions of Citigroup ARS. In fact, no such balance existed.
On September 11, 2009, an Opinion and Order in regards to the Defendants' motion to dismiss the Complaint was granted, without prejudice to Plaintiffs ability to file an amended complaint. Any amended complaint must be filed and served by October 1, 2009.
On June 12, 2009, this case was associated with consolidated MDL case: 1:09-md-02043.
On October 15, 2009, a Second Consolidated Amended Complaint was filed in this action. The defendants responded by filing a motion to dismiss the Second Consolidated Amended Complaint.
On November 02, 2009, an order by one of the plaintiffs (Ocwen Financial) was granted voluntarily dismissing the claims against the defendants with prejudice. However, the claims of two other plaintiffs were not dismissed.
According to a stipulation and order entered by the Court dated February 09, 2010, pursuant to the terms of a settlement agreement between K-V Pharmaceutical Company and Citigroup Global Markets Inc., the Complaint and all of K-V's claims in the above-captioned action against CGMI are voluntarily dismissed with prejudice and without costs or attorneys' fees to either of the parties.
On March 08, 2010, a notice of voluntary dismissal that pursuant to Federal Rule of Civil Procedure 41(a)(I)(A)(i), the plaintiffs voluntarily dismissed the action with prejudice.
On June 17, 2010, the Plaintiffs filed their Third Consolidated Amended Complaint against the defendants.
On September 29, 2010, the Plaintiffs' Fourth Consolidated Amended Complaint was filed with the Court against the Defendants. The defendants responded by filing a motion to dismiss the Fourth Consolidated Amended Complaint. On March 1, 2011, the judge granted the defendants' motion to dismiss and five consolidated cases were closed. Judgment was entered the next day. On March 30, 2011, the plaintiffs filed Notice of Appeal.
On April 20, 2012, a mandate was issued by the Second Circuit Court of Appeals that affirmed the judgment of the district court.