Opinion ID: 176906
Heading Depth: 2
Heading Rank: 2

Heading: Lawsuit Against Citigroup

Text: In November 2008, the Board sued Citigroup in a Florida court. The complaint stated four claims. Each claim alleged misconduct by Citigroup as pension consultant to the Board. Count one alleged that Citigroup breached the consulting contract by failing to provide the services for which it was paid. Citigroup computed the performance of the Fund and the investment managers gross of fees, rather than net of fees, and repeatedly submitted false and misleading information to the Board concerning matters relevant to evaluating the Fund's investment performance. The complaint alleged, These matters included, without limitation, the actual rate of return on the Fund's investments as compared with a purportedly appropriate benchmark rate of return, and the amount of appreciation in the Fund's securities portfolio. The complaint requested compensatory damages on the ground that the Board paid for services never performed and that if the Board had been aware of the real performance of the pension fund, it would have terminated Citigroup, hired a new consultant, and achieved a better rate of return. Moreover, the complaint alleged that Citigroup utilized its position as pension consultant to engage in transactions involving Fund assets through which [it] was able to obtain much larger compensation from its relationship with the Board and the Fund than the amount to which it was entitled under the consulting contract. Count two alleged breach of fiduciary duty. It alleged that a fiduciary relationship existed between Citigroup and the Board because Citigroup induced the Board to place its trust and confidence in [Citigroup], and [Citigroup] assumed a role of superiority in its relationship to the Board with respect to the areas of its purported expertise and exerted influence over the Board. The Board alleged that Citigroup breached its duties as fiduciary by, among other things, repeatedly misleading the Board about the performance of its investments and recommending that it hire investment managers who Citigroup knew would agree to run securities trades through it as broker so that it could earn commissions. The complaint also alleged that Citigroup breached its fiduciary obligations by repeatedly entering into fixed income and equity trades with the Fund for its own account without disclosing to the Board that it was trading as a principal, earning undisclosed profits from those trades, and periodically failing to provide these trades to the Fund at current market rates. Additionally, Citigroup directed certain of the Fund's investment managers to run all their portfolio trading for the Fund through [Citigroup] without Board approval. The complaint again requested compensatory damages. Count three alleged fraud. The complaint alleged that Citigroup made false statements to the Board concerning the performance of the pension fund by, for example, reporting ... performance gross of fees and overstating the appreciation of the Fund's investment portfolio over a seven-year period. It also alleged that Citigroup produced false and misleading quarterly and annual reports on which the Board relied in deciding to retain Citigroup as consultant and to retain various of its investment managers as managers of the assets of the fund. It also alleged that Citigroup fraudulently induced the Board to hire investment managers that would run trades through Citigroup as broker. The complaint requested compensatory damages. Finally, count four alleged negligent misrepresentation. The Board alleged that Citigroup negligently submitted inaccurate reports about the performance of the pension fund by reporting returns gross of fees, not net of fees as required by Florida law; misrepresenting the actual performance of the pension fund; and misrepresenting the appreciation of the assets of the fund. The complaint again sought compensatory damages on the ground that the negligence of Citigroup caused the Board to retain an ineffective pension consultant and investment managers that were underperforming the market.