This case was removed from a New York State Supreme Court class action and transferred to the Southern District of New York. According to the first filed complaint, Citigroup's Form S-3, filed with the SEC on or about March 2, 2006, referred to as the "Shelf Registration Statement." As to each of the Offerings, the Shelf Registration Statement and the relevant Prospectus Supplement (including any documents incorporated by reference) are referred to collectively as the "Offering Materials." The Offering Materials associated with each of the Offerings were materially false and misleading. Among other things, these Offering Materials, failed: to disclose the true extent of its exposure to losses from its mortgage-related assets; to accurately set forth Citigroup's mortgage-related assets to reflect tbeir true fair value; to properly account for of balance sheet vehicles in which mortgage-related assets were being held; disclose Citigroup's obligation to provide liquidity and other support to its off balance sheet entities; and to disclose that the Company had deficient internal accounting controls.
On December 10, 2008, District Court Judge Sidney H. Stein consolidated the Bond Actions under Master File 08 Civ. 9522. The Consolidated Bond Action shall be referred to as In Re: Citigroup Inc. Bond Litigation. On January 15, 2009, a Consolidated Amended Class Action Complaint was filed. On February 17, 2009, District Court Judge Sidney H. Stein signed the Stipulation and Order dismissing the Tolled Underwriters without prejudice. On March 13, 2009, the defendants filed several motions to dismiss the Consolidated Amended Class Action Complaint.
On March 13, 2009, a complaint was filed titled Robert L. Buckingham, et al. v. Citigroup Inc., et al., in the U.S. District Court for the Southern District of New York, docket number 09-CV-2355. The complaint alleges that on January 18, 2008, defendants consummated Citigroup’s Offering pursuant to the false and misleading Registration Statement and Prospectus, selling 130 million depositary shares of Preferred Stock at $25 per share for proceeds of $3.25 billion. Citigroup ultimately announced huge charges associated with its mortgage and credit-related asset portfolio, causing the price of defendant’s common stock and the Preferred Stock issued in the Offering to decline. According to the complaint, the true facts which were omitted from the Registration Statement were: (a) Citigroup’s loan portfolio was impaired to a much larger extent than the Company had disclosed; (b) defendants failed to properly record losses for impaired assets, causing Citigroup’s balance sheet and financial results to be artificially inflated; (c) the Company’s internal controls were inadequate to prevent the Company from improperly reporting its loan loss reserves; and (d) the Company’s capital base was not adequate enough to withstand the significant deterioration in the subprime and credit markets and, as a result, Citigroup would be forced to seek government funding in order to raise significant amounts of additional capital.
On March 16, 2009, a complaint was filed titled Jen Chen, et al v. Citigroup, Inc., et al., in the U.S. District Court for the Southern District of New York, docket number 09-CV-02402. The complaint was filed on behalf of all persons who acquired depositary shares of Citigroup, Inc. (“Citi”) 8.50% Non-Cumulative Preferred Stock, Series F (the “Securities”) (NYSE:C-M) pursuant and/or traceable to a false and misleading registration statement and prospectus issued in connection with the Company’s May 2008 initial public offering of the Securities (the “Offering”). Specifically, the complaint charges Citi, certain of its officers and directors, the underwriters of the Offering and Citi’s auditor with violations of the Securities Act of 1933. Citi is a banking corporation, providing a range of financial products and services to consumer and corporate customers in the United States and internationally. The complaint alleges defendants consummated the Offering pursuant to the false and misleading Registration Statement and Prospectus (collectively, the “Registration Statement”), selling 81.6 million shares of the Securities at $25 per share, for proceeds of over $2 billion. The Registration Statement incorporated Citi’s financial results for 2007 and the first quarter of 2008. Citi ultimately announced huge multi-billion dollar writedowns associated with its exposure to subprime mortgages, related bonds called collateralized debt obligations (“CDOs”), and commercial real estate loans and investments, as well as loans to companies with low credit ratings, causing the price of the Securities to decline. The true facts which were omitted from the Registration Statement were: (a) the Company’s CDOs were impaired to a greater extent than the Company had disclosed; (b) the Company’s commercial real estate loans were impaired to a greater extent than the Company had disclosed; (c) the Company’s investments were impaired to a greater extent than the Company had disclosed; (d) the Company’s loans to companies with low credit ratings were impaired to a greater extent than the Company had disclosed; (e) the assets in the Company’s structured investment vehicles were impaired to a greater extent than the Company had disclosed; (f) defendants failed to properly record losses for impaired assets; (g) the Company’s internal controls were inadequate to prevent the Company from improperly reporting its impaired assets; and (h) the Company’s capital base was not adequate in light of the significant deterioration in the subprime market.
On May 7, 2009, Judge Sidney H. Stein issued the Order consolidating the Buckingham and Chen Actions. According to the Order, the Buckingham and Chen Actions shall be consolidated with the Bond Action for all purposes, and shall be subject to the authority of Lead Plaintiffs and Lead Counsel in the Consolidated Action. All documents in these actions shall be filed in the Master File and noted on the Master Docket.
By the Conditional Multidistrict Litigation Transfer Order dated September 25, 2009, the case is transferred the Southern District of New York, case number 1:09-md-02070-SHS, assigned to the Honorable Sidney H. Stein for coordinated or consolidated pretrial proceedings with the actions.
According to an article dated July 14, 2010, Southern District of New York Judge Sidney Stein on Monday allowed a suit against Citigroup by a class of its bondholders to proceed. The bondholders, represented by Bernstein Litowitz Berger & Grossmann, allege that in 48 bond offerings between May 2006 and August 2008, Citigroup did not fully disclose its "toxic mortgage-linked exposures." Stein dismissed some claims relating to Citigroup's exposure to structured investment vehicles and auction-rate securities, but he allowed bondholders to proceed with claims involving the bank's exposure to subprime mortgage-backed collateralized debt obligations and Citigroup's allegedly insufficient reserves for losses in its residential mortgage loan portfolio. Twenty-eight current and former Citigroup officers and directors, as well as more than a dozen underwriter defendants, have also been named in the class action. Steven Singer of Bernstein Litowitz, who represents pension funds that bought Citigroup bonds, welcomed the decision. He declined to say how big the damages could be. Given that there is still a healthy market for the bonds, shareholders in a parallel action against Citigroup may have bigger claims -- assuming their case survives a motion to dismiss that is pending before Stein.
According to the Opinion and Order #99176 dated July 12, 2010, In Re: Citigroup Inc. Bond Litigation, that because the Court finds that plaintiffs have standing to raise Section 11 and 15 claims and state plausible claims to relief pursuant to those sections insofar as they allege misstatements respecting (1) Citigroups CDO holdings, (2) the credit quality of Citigroup's SIV holding once those holdings were consolidated in December 2007-i.e., the "post-consolidation statements," (3) Citigroup's loan loss reserves, (4) Citigroup' s "well capitalized" status, and (5) Citigroup's compliance with GAAP as set forth more fully above, defendants' motions to dismiss are denied with respect to those claims as raised in counts I, II, III, VI, and VII of the complaint. Defendants' motions to dismiss are granted with respect to all of plaintiffs Section 12 claims as raised in counts IV and V well as plaintiffs' Section 11 claims insofar as they allege misstatements respecting (1 ) Citigroup's exposure to its SIV holdings before those holdings were consolidated in December 2007-i.e., the "pre-consolidation" statements, and (2) Citigroup's ARS exposure.
On July 26, 2010, the defendants filed a motion for reconsideration of the July 12th Opinion and Order. Defendants seek reconsideration of a single issue concerning plaintiffs' standing to assert claims pursuant to Section 11 of the Securities Act of 1933 on behalf of a class of purchasers of certain Citigroup securities. The motion was denied on March 29, 2011.
On March 11, 2011, the plaintiffs filed a motion to certify the class. On October 27, 2011, the defendants filed a motion for judgment. According to the Order entered on November 23, 2011, it is hereby ordered that defendants' Rule 12(c) motion (Dkt. No. 139) is converted to a motion for summary judgment pursuant to Rule 12(d) and is dismissed with leave to renew in connection with the motion for summary judgment contemplated in the Revised Scheduling Order.
On March 18, 2013, the parties entered into a Stipulation of Settlement. This Settlement was preliminarily approved by the Court on March 25. On August 20, the Court issued an Order granting the plaintiffs' motion for final approval of the settlement and the plan of allocation.