Citigroup in $13.5m settlement over defunct CSO hedge fund
Citigroup Inc (C.N) agreed to pay $13.5 million to settle a lawsuit accusing the bank of deceiving investors into remaining in its Corporate Special Opportunities hedge fund, only to suffer big losses when the fund was liquidated in November 2008.
The lawsuit accused Citigroup and its Citigroup Alternative Investments affiliate of misleading investors in a Dec. 14, 2007 letter about the status of the fund's leveraged, 558 million euro ($756 million at the time) original investment in a syndicated loan arranged for ProSiebenSat1 SE (PSMGn.DE), a large German broadcaster.
Investors said Citigroup falsely told them in the letter that the quality of the fund's portfolio was "fundamentally sound," but was forced six weeks later to suspend redemptions. They claimed to lose the bulk of their investments when the fund was liquidated, despite Citigroup's efforts to prop it up. The preliminary settlement was filed in Manhattan federal court and requires court approval. Citigroup denied wrongdoing in agreeing to settle. A spokeswoman, Danielle Romero-Apsilos, said the New York-based bank is pleased to resolve the matter.