IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

OKLAHOMA FIREFIGHTERS :

PENSION & RETIREMENT SYSTEM, :

:

Plaintiff, :

:

v. : C.A. No. 9587-ML (VCN)

:

CITIGROUP INC., :

:

Defendant. :

MEMORANDUM OPINION

Date Submitted: January 22, 2015

Date Decided: April 24, 2015

Michael J. Barry, Esquire, Nathan A. Cook, Esquire, and Justin K. Victor, Esquire 

of Grant & Eisenhofer, P.A., Wilmington, Delaware, Attorneys for Plaintiff.

Stephen P. Lamb, Esquire and Meghan M. Dougherty, Esquire of Paul, Weiss, 

Rifkind, Wharton & Garrison LLP, Wilmington, Delaware; Brad S. Karp, Esquire, 

Bruce Birenboim, Esquire, Susanna M. Buergel, Esquire, and Caitlin E. 

Grusauskas, Esquire of Paul, Weiss, Rifkind, Wharton & Garrison LLP, New 

York, New York; and Jane B. O’Brien, Esquire of Paul, Weiss, Rifkind, Wharton 

& Garrison LLP, Washington, DC, Attorneys for Defendant.

NOBLE, Vice Chancellor

EFiled: Apr 24 2015 12:37PM EDT 

Transaction ID 57133205

Case No. 9587-ML
1

Plaintiff seeks to inspect certain books and records of Defendant Citigroup

Inc. (“Citigroup” or the “Company”) in order to investigate possible 

mismanagement and breaches of fiduciary duty by Citigroup’s directors and 

officers in connection with events at two of Citigroup’s subsidiaries. Citigroup 

argues that Plaintiff has not established a credible basis to infer possible 

mismanagement or wrongdoing by the Company’s fiduciaries. Further, assuming 

that Plaintiff has stated a proper purpose, Citigroup contends that the scope of 

inspection demanded is overbroad.

On June 27, 2014, this case was tried on a paper record before a Master in 

Chancery. The Master issued a draft bench report recommending that the Court 

find that Plaintiff has stated a proper purpose for inspection, but narrowing the 

scope of documents sought by Plaintiff’s demand.1 

Citigroup took timely exceptions to the draft report. After the parties briefed 

those exceptions, the Master issued her final report and recommendation (the 

“Final Report”), confirming her conclusion that Plaintiff had established a proper 

purpose for inspection.2 She did, however, again narrow the scope of documents 

that she deemed Plaintiff should be entitled to inspect.

 

1

Section 220 Request Trial Transcript and Draft Bench Report of the Master, 

Okla. Firefighters Pension & Ret. Sys. v. Citigroup Inc., C.A. No. 9587-ML, at 

104-13 (Del. Ch. June 27, 2014) (TRANSCRIPT).

2 Okla. Firefighters Pension & Ret. Sys. v. Citigroup Inc., 2014 WL 5351345, at *8 

(Del. Ch. Sept. 30, 2014).
2

On October 7, 2014, Citigroup filed its Notice of Exception to the Master’s 

Final Report. The parties briefed Citigroup’s exceptions and presented argument 

before this Court. This is the Court’s ruling on the Company’s exceptions.

I. BACKGROUND

Citigroup, a Delaware corporation, is a diversified financial services holding 

company headquartered in New York, New York. Its businesses provide a range 

of financial products, including consumer banking and credit, corporate and 

investment banking, securities brokerage, transaction services, and wealth 

management.3 Plaintiff Oklahoma Firefighters Pension & Retirement System has 

held Citigroup stock since December 31, 2007.

On March 17, 2014, Plaintiff made a written demand (the “Demand”) on 

Citigroup pursuant to 8 Del. C. § 220 (“Section 220”).

4

 The Demand sought books 

and records relating to recently-disclosed adverse events involving two of 

Citigroup’s subsidiaries: Banco Nacional de Mexico, S.A. (“Banamex”) and 

Banamex USA. More specifically, Plaintiff aims to investigate a recent fraud at 

Banamex (the “Banamex fraud”) and Banamex USA’s compliance with the Bank 

 

3

Transmittal Aff. of Meghan M. Dougherty in Supp. of Def.’s Br. in Supp. of 

Exceptions to the Master’s Final Report (“Dougherty Aff.”) Ex. G.

4 Verified Compl. Pursuant to 8 Del. C. § 220 to Compel Inspection of Books and 

Records (“Compl.”) Ex. 1.
3

Secrecy Act (the “BSA”)5and anti-money laundering (“AML”) requirements 

under federal laws and banking regulations.

A. The Banamex Fraud

Banamex, an indirect wholly-owned Citigroup subsidiary, is one of the 

Company’s largest foreign consumer banks, accounting for approximately 10% of 

the Company’s global profits.6 Citigroup views Banamex as “an integral part of 

[Citigroup’s] global network and a source of great pride . . . .”7 “Banamex is . . . 

subject to the same risk, control, anti-money-laundering and technology standards 

and oversight which are required throughout the [Company].”8 Citigroup’s CoPresident, Manuel Medina-Mora, holds the title of “Chairman, Mexico” and 

oversees Citigroup’s Mexican business.9

On February 28, 2014, Citigroup disclosed that a recent fraud had been 

discovered at Banamex:

As of December 31, 2013, Citi, through [Banamex], had 

extended approximately $585 million of short-term credit to 

Oceanografia S.A. de C.V. (“OSA”), a Mexican oil services company, 

through an accounts receivable financing program. OSA has been a 

key supplier to Petróleos Mexicanos (“Pemex”), the Mexican stateowned oil company. Pursuant to the program, Banamex extended 

credit to OSA to finance accounts receivables due from Pemex. As of 

 

5

31 U.S.C. § 5311, et. seq.

6

Transmittal Aff. of Justin K. Victor in Supp. of Pl.’s Answering Br. in Opp’n to 

Citigroup’s Exceptions to the Master’s Final Report (“Victor Aff.”) Ex. 2.D.

7 Dougherty Aff. Ex. G.

8 Victor Aff. Ex. 15 at 2.

9 Victor Aff. Ex. 19.
4

December 31, 2013, Banamex also had approximately $33 million in 

either outstanding loans made directly to OSA or standby letters of 

credit issued on OSA’s behalf.

On February 11, 2014, Citi learned that OSA had been 

suspended from being awarded new Mexican government contracts. 

Upon learning of this suspension, Citi, together with Pemex, 

commenced detailed reviews of their credit exposure to OSA and of 

the accounts receivable financing program over the past several years. 

As a consequence of those reviews, on February 20, 2014, Pemex 

asserted that a significant portion of the accounts receivables recorded 

by Banamex in connection with the Pemex accounts receivable 

financing program were fraudulent and that the valid receivables were 

substantially less than the $585 million referenced above.10

The Banamex fraud caused Citigroup to adjust downward its fourth quarter 

and full year 2013 financial results by $235 million after tax.11 Citigroup’s net 

income fell from $13.9 billion to $13.7 billion.12 Citigroup’s Chief Executive 

Officer (“CEO”), Michael Corbat, described the Banamex fraud as “significant” 

and suggested that “the impact to [Citigroup’s] credibility [would be] hard[] to 

calculate.”13 The Company fired at least twelve employees, including four highranking executives in Mexico.14

 

10 Victor Aff. Ex. 2.A.

11 Id.

12 Id. In April 2014, Citigroup disclosed that a second fraud had been uncovered at 

Banamex. The magnitude of the second fraud, which involved less than 

$30 million in loans, was small relative to the Banamex fraud. Victor Aff. Ex. 5. 

As a result of the frauds, Citigroup’s Mexican unit reduced its first quarter net 

profit by $112 million. Victor Aff. Ex. 4.

13 Dougherty Aff. Ex. G.

14 Victor Aff. 13.
5

Moody’s Investors Service (“Moody’s”) downgraded its ratings for 

Banamex to “reflect the severity of the fraud revealed in March and the subsequent 

revelations about the deficiencies in Banamex’s risk management and auditing 

functions that permitted this fraud to occur.”15 Moody’s questioned whether 

structural and cultural risk management and governance issues at Banamex were 

broader than initially thought.16

B. Banamex USA’s BSA/AML Compliance

Banamex USA is a California-based Citigroup subsidiary. It is a deposittaking bank that provides retail banking and money-transfer services to customers 

doing business in Mexico and the United States. In its Annual Report on Form 10-

K, filed on March 3, 2014, Citigroup disclosed that it and Banamex USA had 

received grand jury subpoenas issued by the United States Attorney’s Office for 

the District of Massachusetts (the “U.S. Attorney’s Office”) relating to compliance 

with BSA and AML requirements under federal laws and banking regulations. 

Banamex USA had also received a subpoena (addressing its BSA/AML programs)

from the Federal Deposit Insurance Corporation (the “FDIC”).

17

The U.S. Attorney’s Office was reportedly investigating “whether [Banamex 

USA] . . . failed to alert the government to suspicious banking transactions along 

 

15 Victor Aff. Ex. 21 at OFP00000979.

16 Id.

17 Victor Aff. Ex. 9 at OFP00000512.
6

the U.S.-Mexico border that in some cases involved suspected drug-cartel 

members . . . .”18 Concerns stemmed from Citigroup’s failure to “submit . . . 

suspicious-activity reports flagging the questionable transactions . . . .”19 The BSA 

requires banks to notify federal authorities of any suspicious activity on cash 

transactions over $10,000.20 

The government subpoenas came on the heels of a series of consent orders 

(the “Consent Orders”) that Citigroup had entered into with various regulators in 

2012 and 2013 regarding BSA/AML compliance. The first order, on April 4, 

2012, was with the Office of the Comptroller of the Currency (the “OCC”). The 

OCC had investigated Citibank, N.A. (“Citibank”), another Citibank subsidiary,

and concluded that Citibank’s BSA/AML compliance program was deficient. 

According to the OCC, Citibank had

failed to adopt and implement a compliance program that adequately 

covers the required BSA/AML program elements due to an 

inadequate system of internal controls and ineffective independent 

testing. [Citibank] did not develop adequate due diligence on foreign 

correspondent bank customers and failed to file Suspicious Activity 

 

18 Victor Aff. Ex. 6.

19 Id.

20 Id. In 2012, Citigroup had sent a team of employees and consultants to Banamex 

USA’s headquarters to install new controls and review past transactions. That 

investigation had revealed “problems with a money-services business that allowed 

people to transfer money across the U.S.-Mexico border without being a 

customer.” Id.
7

Reports (“SARs”) related to its remote deposit capture/international 

cash letter instrument activity in a timely manner.21

Later in 2012, Banamex USA entered into a consent order with the FDIC

and the California Department of Financial Institutions. Neither admitting nor 

denying legal violations, Banamex USA agreed to address, among other issues, the 

“(i) overall integrity and effectiveness of the BSA/AML compliance program, 

including policies, procedures, and processes; (ii) BSA/AML risk assessment; 

(iii) BSA reporting and recordkeeping requirements . . . [and] (vii) personnel 

adherence to [Banamex USA’s] BSA/AML policies, procedures, and 

processes . . . .”22

Then, on March 21, 2013, Citigroup entered into a consent order with the 

Board of Governors of the Federal Reserve System (the “Federal Reserve”). This 

order referenced the previous two and stated the Federal Reserve’s conclusion that 

“Citigroup lacked effective systems of governance and internal controls to 

adequately oversee the activities of the Banks with respect to legal, compliance, 

and reputational risk related to the Banks’ respective BSA/AML compliance 

programs . . . .”23 Citigroup’s board of directors (the “Board”) agreed to enhance 

its risk management program with regard to BSA/AML compliance.

 

21 Victor Aff. Ex. 18 at 2. The Bank neither admitted nor denied the OCC’s 

findings.

22 Victor Aff. Ex. 16 at 5.

23 Victor Aff. Ex. 17 at 2-3. The “Banks” are Citibank and Banamex USA. 
8

II. ANALYSIS

A. Legal Standard

This Court reviews the Master’s factual findings and legal conclusions de 

novo.

24

 

Through Section 220, “[a]ny stockholder, in person or by attorney or other 

agent, shall, upon written demand under oath stating the purpose thereof, have the 

right . . . to inspect for any proper purpose . . . [t]he corporation’s . . . books and 

records . . . .”25 A stockholder seeking inspection must demonstrate its proper 

purpose by a preponderance of the evidence.26

To investigate waste and mismanagement, which is a proper purpose, a 

stockholder “must present some credible basis from which the court can infer that 

waste or mismanagement may have occurred.”27 However, the stockholder is “not 

required to prove by a preponderance of the evidence that waste and 

[mismanagement] are actually occurring.”28 “Both the stated purpose and the 

 

24 Ct. Ch. R. 144(a).

25 8 Del. C. § 220(b)(1).

26 Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117, 121 (Del. 2006).

27 Thomas & Betts Corp. v. Leviton Mfg. Co., Inc., 681 A.2d 1026, 1031 (Del. 

1996).

28 Id.
9

underlying need for information necessarily derive from an absence of conclusive 

facts, and such a standard would beg the ultimate question at issue.”29

“Delaware courts routinely reject the conclusory allegation that because 

illegal behavior occurred, internal controls must have been deficient, and the board 

must have known so.”30 Nonetheless, the Court is not ruling on a motion to 

dismiss, but a Section 220 demand, where “the ‘credible basis’ standard sets the 

lowest possible burden of proof. The only way to reduce the burden of proof 

further would be to eliminate any requirement that a stockholder show some 

evidence of possible wrongdoing.”31

B. Plaintiff’s Purposes for Inspection

Plaintiff intends to investigate mismanagement and possible breaches of 

fiduciary duty by Citigroup’s directors and officers in connection with the 

Banamex fraud and Banamex USA’s BSA/AML compliance.32 Plaintiff seeks to 

investigate, in contemplation of derivative litigation, the disinterest of the Board to 

determine whether presuit demand would be excused.

33

 

29 Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and Commercial 

Practice in the Delaware Court of Chancery, § 8.06[e][1], at 8-135 (2014).

30 Desimone v. Barrows, 924 A.2d 908, 940 (Del. Ch. 2007).

31 Seinfeld, 909 A.2d at 123.

32 Compl. Ex. 1. 

33 Id.
10

C. Investigating the Banamex Fraud Is a Proper Purpose

Citigroup’s Risk Management and Finance Committee (the “Risk 

Management Committee”) is a standing committee of its Board. The Risk 

Management Committee oversees the Company’s risk management, including its 

risk appetite, its risk policies, its exposure to operational risk, and the qualifications 

and background of senior risk officers.34 The Risk Management Committee 

reviews management’s design, implementation, and maintenance of an effective 

risk program. It also reports to the Board regarding the Company’s risk profile and 

risk management policies and practices. To fulfill its charge, the committee

receives regular management reports and may request information to investigate 

matters within the scope of its duties.

35

 The Board also maintains an Audit 

Committee, which further oversees risk assessment and risk management.36

Plaintiff intends to test whether it has viable Caremark claims against 

Citigroup’s fiduciaries for failing to fulfill their oversight responsibilities. 

According to Citigroup, while the Banamex fraud was unfortunate, its occurrence 

only supports an inference of mismanagement or wrongdoing at Banamex, not at 

Citigroup. Caremark claims are among the hardest to plead successfully.37 For 

that reason, this Court has analogized the practice of immediately filing a 

 

34 Victor Aff. Ex. 10 at 2. This is not an exhaustive list of its duties.

35 Victor Aff. Ex. 10 at 1.

36 Victor Aff. Ex. 12 at 5.

37 See In re Caremark Int’l Inc. Deriv. Litig., 698 A.2d 959, 968 (Del. Ch. 1996).
11

complaint asserting such claims after a negative corporate event to purchasing a 

lottery ticket.38 Most claims are unlikely to survive a motion to dismiss, but filing 

is cheap and the payoff, for the “winning ticket,” is potentially large.

The Court therefore encourages stockholders to pursue a Section 220 

demand instead of bringing a premature complaint.

[O]nce you have those books and records, you can make an intelligent 

decision about whether or not to sue, because it may well be that the 

board is not involved in the underlying misconduct and, therefore, the 

board is the appropriate corporate actor to determine what if anything 

should be done on behalf of the company as a result of the corporate 

trauma . . . . 

Second and perhaps equally important, if you learn that the 

board was somehow implicated and therefore is not the institutionally 

competent actor, you can actually plead a complaint that might 

survive Rule 23.1.39

Here, the record would not likely support fiduciary duty claims capable of 

surviving a motion to dismiss. However, the relevant question is whether the 

record establishes a credible basis, the “lowest burden of proof,” to support a 

conclusion that Plaintiff’s demand is based on more than mere suspicion and 

conjecture. Of course, it may turn out “that the board is not involved in the 

 

38 U.C.F.W. Local 1776 & Participating Emp’rs Pension Fund v. Allergan, Inc., 

C.A. No. 6223-VCL, at 28 (Del. Ch. Apr. 27, 2011) (TRANSCRIPT).

39 Id. at 28-29.
12

underlying misconduct and, therefore, the board is the appropriate corporate actor 

to determine what if anything should be done on behalf of the company . . . .”40

It would be inappropriate to infer possible mismanagement by Citigroup’s 

Board or senior management merely because wrongdoing occurred at Banamex 

and the Board has oversight responsibility. If Plaintiff’s showing ended there, the 

record would merely indicate that improper behavior may have occurred despite 

Citigroup’s internal controls. An inference that those controls were deficient, in a 

sense capable of establishing a credible basis for a Caremark claim, would be 

overreaching.

However, before the Banamex fraud was revealed, there were red flags

indicating issues at the subsidiary. Plaintiff argues that Citigroup’s Board either 

was, or should have been, aware of the warning signs. The Banamex fraud was not 

merely a blip on Citigroup’s radar. Banamex is “an integral part of [Citigroup’s] 

global network and a source of great pride . . . .”41 It accounts for approximately 

10% of Citigroup’s annual profits and the fraud was material enough to Citigroup 

to cause it to restate its financial results.42 Citigroup took broad remedial actions to 

address the fraud and its fallout. One might commend Citigroup for the actions it 

took once the Banamex fraud was revealed. Conversely, one might also question, 

 

40 Id.

41 Dougherty Aff. Ex. G.

42 Id.
13

if the event was so significant to Citigroup, how the Company allowed it to occur 

in the first place.43

Citigroup’s CEO confirmed that “[t]here were telltales [of the Banamex 

fraud] along the way . . . .”44 “[E]mployees missed signs of trouble they should 

have recognized and elevated to superiors.”45 Perhaps, the failures to report up the 

ladder indicate a lack of adequate controls. Additionally, debt ratings firms Fitch 

and Standard & Poor’s both stopped rating Oceanografia, Banamex’s counterparty 

to the Banamex fraud loans, in 2010, citing insufficient financial information.

46

 

Citigroup did not review its credit exposure to Oceanografia until February 11, 

2014, upon learning that Oceanografia had been suspended from being awarded 

new Mexican government contracts.47

These circumstances raise questions over whether proper risk management 

and detection systems were in place, or were properly followed. One can 

reasonably infer that if the Risk Management and Audit Committees were 

functioning properly, then a system would have existed to detect, prevent, or 

 

43 As one financial journalist observed, the Banamex fraud indicated a failure “in 

the . . . Banamex and Citigroup risk-management departments, where no one 

seems to have stopped to ask how on earth a simple accounts-receivable credit line 

could have grown to more than half a billion dollars in size.” Victor Aff. 2.F. 

(Felix Salmon, Incompetent Banamex, THE STREET, Mar. 4, 2014, at 1).

44 Victor Aff. Ex. 15 at 1.

45 Id.

46 Victor Aff. Ex. 2.D at 2.

47 Victor Aff. Ex. 2.A at 1.
14

minimize the Banamex fraud. That the fraud involved an accounts-receivable 

credit line, a core component of the bank’s business, is further cause for concern. 

Notably, Banamex is subject to the same oversight standards which are required 

throughout the Company.48

Citigroup is a sprawling multi-billion dollar corporation. That wrongdoing 

occurred at one of its subsidiaries falls far short of indicating failures on behalf of 

its fiduciaries. Nonetheless, given the nature and magnitude of the Banamex fraud, 

there is at least a credible basis to infer deficiencies at Citigroup, and Plaintiff is 

entitled to investigate.49 This conclusion does not ignore the corporate 

separateness of Citigroup and Banamex, but recognizes the Board’s role in 

overseeing its important subsidiary.

D. Investigating Banamex USA’s BSA/AML Compliance Is a Proper Purpose

The Court agrees with the Master that “the issue of Banamex USA’s 

BSA/AML compliance is a closer case” than the Banamex fraud.50 The Consent 

 

48 Victor Aff. Ex. 15 at 2.

49 Southeastern Pennsylvania Transportation Authority v. AbbVie, Inc., 2015 WL 

1753033 (Del. Ch. Apr. 15, 2015), is distinguishable. In that case, the record did 

not establish a credible basis to doubt that directors had acted loyally in connection 

with approving and subsequently terminating a merger. The record reflected that 

the board was informed of the merger-related risks and had factored the risks into 

its decision to approve the deal. Id. at *15. Here, the Plaintiff is not asserting that 

Citigroup’s board improvidently made a business decision that imposed a 

substantial risk on the Company. Instead, the Plaintiff has established a minimum 

credible basis from which one can infer a failure of oversight at the Company.

50 See Okla. Firefighters Pension & Ret. Sys., 2014 WL 5351345, at *7.
15

Orders, standing alone, would not satisfy the credible basis threshold. Further, that 

Citigroup and Banamex USA subsequently received subpoenas relating to 

BSA/AML issues does not, in the abstract, allow the inference that Citigroup failed 

to implement the Consent Orders properly.

Citigroup correctly observes that the fact that a corporation is “one of many 

companies in many industries caught up in the dragnet of a federal 

investigation . . . does not support an inference of possible wrongdoing.”51 In 

isolation, Citigroup’s receipt of subpoenas regarding BSA/AML issues does not 

adequately suggest mismanagement or wrongdoing by its fiduciaries.

However, there is evidence that the subpoenas were not merely the 

consequence of Citigroup’s being “caught up in the dragnet of a federal 

investigation.” The subpoenas were issued shortly after Citigroup entered the 

Consent Orders, which arose from findings by the OCC, the FDIC, and the Federal 

Reserve that Citigroup and certain of its subsidiaries, including Banamex USA, did 

not maintain adequate controls for compliance with BSA/AML requirements.52 

Banamex USA, which is overseen by Citigroup, is now under investigation for an 

apparent failure to report suspicious banking transactions. The Consent Orders 

addressed BSA reporting requirements, which include suspicious activity 

 

51 La. Mun. Police Emps.’ Ret. Sys. v. Lennar Corp., 2012 WL 4760881, at *4 

(Del. Ch. Oct. 5, 2012).

52 Again, Citigroup has neither admitted nor denied the agencies’ findings.
16

reporting. The government investigation is thus targeted at Citigroup and 

Banamex USA, and at least part of the government’s reason for investigating is 

known. The government’s rationale relates directly to events at Banamex USA

that one might expect not to occur if the Consent Orders had been properly 

implemented.

Therefore, Plaintiff “has cobbled together sufficient evidence, taken as a 

whole, to satisfy the threshold credible evidence standard.”53 One could 

reasonably infer that Citigroup either incorrectly implemented the Consent Orders 

or failed to carry out appropriately the actions those orders contemplated. Plaintiff 

has a proper purpose to investigate Citigroup’s implementation of the controls and 

compliance programs that it agreed to under the Consent Orders.54

E. Proper Scope of Inspection

An inspection under Section 220 “is not open-ended; it is restricted to 

inspection of the books and records needed to perform the task. Accordingly, 

inspection is limited to those documents that are necessary, essential, and sufficient 

for the shareholders’ purpose.”55 This Court “has wide latitude in determining the 

 

53 Robotti & Co., LLC v. Gulfport Energy Corp., 2007 WL 2019796, at *3 (Del. 

Ch. July 3, 2007).

54 A broader investigation into what may have led to the Consent Orders is not a 

proper purpose. The Master reached this same conclusion.

55 BBC Acq. Corp. v. Durr-Fillauer Med., Inc., 623 A.2d 85, 88 (Del. Ch. 1992).
17

proper scope of inspection.”56 In exercising this discretion, the Court limits 

inspection to “documents reasonably required to satisfy the purpose of the 

demand.”57 Circumscribing an appropriate scope “is [a] fact specific [exercise] 

and will necessarily depend on the context in which the shareholder’s inspection 

demand arises.”58 “[T]he stockholder should be given enough information to 

effectively address the problem. . . .”59

The Master’s Final Report recommends production of

(1) board and committee minutes and materials provided to the board 

or committees, (2) materials containing talking points, scripts, or other 

summaries of remarks or reports that were delivered at a board or 

committee meeting, and (3) policies and procedures, but only to the 

extent those books and records relate to the following topics: (a) the 

Banamex fraud, (b) the BSA/AML matters at Banamex USA, (c) 

Banamex’s fraud detection and prevention efforts, and (d) Citigroup’s 

BSA/AML compliance.60

The Master limited the documents subject to her recommendation with two 

separate timeframes: January 2011 until the date of an order for Banamex fraudrelated documents, and January 2012 until the date of an order for documents 

relating to Banamex USA’s BSA/AML compliance.

Citigroup’s only exception to the Master’s recommended scope, given the 

Court’s finding of proper purpose, is that production of documents relating to 

 

56 Thomas & Betts Corp., 681 A.2d at 1035.

57 Carapico v. Phila. Stock Exch., Inc., 791 A.2d 787, 793 (Del. Ch. 2000).

58 Espinoza v. Hewlett-Packard Co., 32 A.3d 365, 372 (Del. 2011).

59 Saito v. McKesson HBOC, Inc., 806 A.2d 113, 115 (Del. 2002).

60 Okla. Firefighters Pension & Ret. Sys., 2014 WL 5351345, at *8.
18

“Citigroup’s BSA/AML compliance” would exceed what is necessary, essential, 

and sufficient to investigate Plaintiff’s BSA/AML concerns. Citigroup contends 

that this topic of inspection should be narrowed because Plaintiff’s proper purpose 

regarding BSA/AML compliance is limited to investigating the implementation of 

the Consent Orders and not more generally into what may have led to the orders. 

However, the scope recommended by the Master is appropriately tailored to 

allow Plaintiff to investigate its potential claims while mitigating the burden on 

Citigroup. The first Consent Order was entered into on April 4, 2012. The Master 

recommended inspection regarding “Citigroup’s BSA/AML compliance” of

documents from January 2012 to the date of the order.61 This timeframe 

appropriately allows Plaintiff to investigate Citigroup’s implementation of the 

Consent Orders. Not only did the Master place time constraints on the documents 

to be produced, but she only recommended production of three categories of 

documents, as described in the Final Report.62

“Citigroup’s BSA/AML compliance” does not describe a vague category of 

documents. It embodies a class of documents potentially instructive on the issue of 

the Company’s implementation of the controls and compliance programs 

contemplated by the Consent Orders. While it is unavoidable that some documents 

 

61 The Master substantially narrowed Plaintiff’s request for documents dating back 

to January 1, 2008.

62 See supra text accompanying note 60.
19

within this category’s scope may not ultimately advance Plaintiff’s proper purpose, 

production of this category is necessary to allow Plaintiff to investigate fully 

BSA/AML compliance. Documents concerning Citigroup’s BSA/AML 

compliance are targeted toward investigating whether the Consent Orders were 

properly implemented. Narrowing the scope of inspection further than the Master 

has already done risks rendering Plaintiff’s investigation incomplete.

III. CONCLUSION

Plaintiff has established a proper purpose to investigate mismanagement and 

possible breaches of fiduciary duty by Citigroup’s fiduciaries in connection with 

the Banamex fraud and Banamex USA’s BSA/AML compliance. The Master 

appropriately limited the scope of Plaintiff’s demand to categories of documents 

that are necessary and essential for Plaintiff’s purpose.

After a de novo review of the issues raised, Citigroup’s exceptions to the 

Master’s Final Report are denied. The Court approves and adopts the Final Report 

and the recommendations contained therein.

Counsel are requested to confer and to submit an implementing form of 

order.