Someone Forgot To Immunize Citi For Allegedly Lying To CDO Investors


Always remember to put the broadest possible disclaimers of liability into all your marketing documents and contracts. It’s not like anyone is going to read those things anyway, at least not until they’ve already lost $1 billion.

Citigroup Inc. failed to persuade an appeals court to throw out a lawsuit that claims it lied about the riskiness of securities valued at almost $1 billion, as the world’s biggest banks continue to defend against allegations they misled investors in the run-up to the financial crisis...

Citigroup had argued the fraud claim should be dismissed because Loreley hasn’t shown that it relied on bank documents to buy the securities.

The appeals court said that while disclaimers made in “carefully drafted documents executed by sophisticated commercial parties” are usually enough to protect sellers from liability, Citigroup’s disclosures didn’t address the misrepresentations and omissions alleged by Loreley.

Citigroup Must Face Fraud Claim Over $1 Billion in CDOs [Bloomberg]


Appellate Court Willing to Entertain the Possibility that Citi Was Not Committing Fraud

I've had some fun these last few days proposing counterintuitive theories for why Citi might not suck as much as you probably think it does and it's nice to see others joining in the pastime, even if this sounds a little far-fetched: The district court’s logic appears to overlook the possibilities (i) that Citigroup might well not consent to settle on a basis that requires it to admit liability, (ii) that the S.E.C. might fail to win a judgment at trial, and (iii) that Citigroup perhaps did not mislead investors. That piece of rank conjecture is from the Second Circuit's opinion on an appeal* of Judge Rakoff's rejection of the settlement between the SEC and Citi over some mortgage-backed securities. Here's DealBook: