Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
April 5 — A group of investors are claiming that Citigroup Inc. officers and directors inadequately responded to “red flags” indicating multiple internal compliance problems.
The investors point to a string of regulatory actions and investigations against the company, including probes of its Mexican unit, Banco Nacional de Mexico SA, by the Justice Department and the Securities and Exchange Commission related to alleged fraudulent loans.
According to the investors' complaint, internal documents show that Citigroup's board knew about the ongoing compliance and control problems across multiple lines of business and failed to take proper action.
The redacted complaint was filed April 4 in the Delaware Chancery Court. The complaint stems from a contentious books and records action in which the chancery court ordered Citigroup to turn over documents to a pension fund—the Oklahoma Firefighters Pension & Retirement System—seeking to investigate whether the directors failed to fulfill their oversight responsibilities .
The investors asserted that the documents show that directors were told “in a steady drumbeat of repeated warnings from management and regulators” about the company's compliance and internal control problems.
“Despite repeated reports of serious issues, the Board failed to take meaningful, affirmative steps to ensure that control failures be remedied,” the filing stated. “To the contrary, no matter how much detail the Board was provided, its members sat like stones growing moss.”
Citigroup spokesman Kamran Mumtaz told Bloomberg BNA in an e-mail April 5 that “the claims are without merit.”
The investors alleged that directors “consciously” breached their fiduciary duties by failing to implement a company-wide compliance system to stop and prevent illegal conduct that occurred following the company's “near death experience” that resulted in the government making a corporate bailout.
Specifically, the investors asserted that directors breached their oversight duties in connection with the company's
“Although Citigroup was saved in 2009 because it was “‘too big to fail,' its Board has now concluded that Citigroup is simply ‘too big to govern,'” the complaint said. “Judicial relief is needed now to hold Defendants liable for breaches of their fiduciary duty of oversight and to stem the tide of dysfunction.”
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
The redacted complaint is available at http://www.bloomberglaw.com/public/document/Oklahoma_Firefighters_Pension__Retirement_System_v_Michael_L_Corb.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)