In the days following Citigroup’s November 4, 2007 announcement (here) that it would be writing off an additional $8 to $11 billion due to declines in values of U.S. subprime related debt exposures, as well as its announcement (here) of the departure of its Chairman and CEO Charles O. Prince, the company has been hit with a heap of lawsuits, making it the latest company to be caught up in the subprime lending-related litigation wave.
Citigroup and the various defendants breached their fiduciary duties owed to the Plans’ participants by: (1) failing to prudently and loyally manage the Plans’ assets; (2) failing to provide participants with complete, accurate and material information concerning Citigroup’s business and financial condition necessary for participants to make informed decisions concerning the prudence of directing the Plans to invest in Citigroup stock; and (3) failing to appoint and monitor the performance of the other fiduciaries. Citigroup’s exposure to the subprime market and its contingent liabilities with respect to various off-balance sheet transaction has led to the resignation of Citigroup’s CEO and caused the Plans to suffer well over $1 billion in market losses.
Defendants issued materially false and misleading statements regarding the company’s business and financial results. The complaint specifically alleges that: (i) Defendants’ portfolio of CDOs contained billions of dollars worth of impaired and risky securities, many of which were backed by subprime mortgage loans; (ii) Defendants failed to properly account for highly leveraged loans such as mortgage securities; and (iii) Defendants had failed to record impairment of debt securities which they knew or disregarded were impaired, causing the Company’s results to be false and misleading.