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Citigroup Inc. (NYSE: C)
November 01, 2004
Citigroup Files Detailed Response to Parmalat Claims Rejection
Filing Includes Explanation of Transactions, Refutes Allegations of Wrongdoing
London — Citigroup announced it has filed with the Court of Parma's Bankruptcy Division a detailed response refuting the basis for the Parmalat Extraordinary Commissioner's proposed rejection of Citigroup claims. Citigroup released a summary of its response today, believing that the well-publicized but factually baseless allegations that accompanied the Extraordinary Administrator's rejection of its claims and those of the securitisation companies Eureka and Archimede compelled Citigroup to demonstrate that the Extraordinary Commissioner's view of Citigroup's complicity in the Parmalat fraud is unfounded and completely false.
Citigroup's filing shows that the Extraordinary Commissioner has presented no credible evidence that substantiates his allegations of wrongdoing -- nor could he. The accounting investigation conducted by Ms. Stefania Chiaruttini, on which the Extraordinary Commissioner's allegations appear to be based, is flawed and misleading.
William J. Mills, CEO of Citigroup's Global Corporate and Investment Banking Group for Europe, Middle East and Africa, commented: "We are pleased to present the facts in response to the baseless allegations against us and to reiterate that Citigroup did nothing wrong and is itself a major victim of the Parmalat fraud. Citigroup will defend itself vigorously against unwarranted attacks, and will pursue all opportunities for fair redress of its losses."
The Parmalat Extraordinary Commissioner's decision to reject Citigroup's claims is expressly based on allegations made in a lawsuit he filed last July in the U.S. state of New Jersey. That suit alleges without any legitimate factual support that Citigroup knew about Parmalat's conduct and precarious financial position and helped Parmalat conceal the truth from the investing public. The basis for this allegation as set forth in the lawsuit makes plain that the Extraordinary Commissioner has relied on a collection of fundamental misrepresentations, misunderstandings and factual errors, as highlighted in the attached summary submitted as part of Saturday's filing with the Court of Parma.
Archimede/Eureka securitisation
The allegation that Citigroup was aware of a fraudulent manipulation of Parmalat's invoicing structure and therefore complicit in Parmalat's fraud is non sense. There is no credible evidence and, not surprisingly, none is offered by the Extraordinary Commissioner to show that Citigroup knew Parmalat was using and manipulating this invoicing structure to double-count sales and generate additional financing from various financial institutions. Furthermore, at no stage were the receivables purchased from Parmalat by Archimede sold on to investors. In fact it is Citigroup --not investors in Eureka -- that has sustained these losses from fraudulent invoicing at Parmalat.
Buconero/Geslat transaction
The Buconero/Geslat transaction was not, as is maintained, a disguised loan. To the contrary, the transaction was disclosed in Geslat's accounts and the structure was fully compliant with the requirements o f Italian law. Similar structures have been used by other leading Italian companies to obtain low cost financing.
Parmalat Canada
Citigroup took a shareholding in Parmalat Canada with a right to sell its shares to Parmalat at pre-determined prices. The allegation that this was a disguised loan is flat wrong. Nothing about this transaction was disguised -- both Citigroup and Parmalat disclosed that Citigroup could sell its shares under certain conditions.
Zini accounts
Finally, the Extraordinary Commissioner's allegation that Citigroup should have known that accounts opened by Mr Gian Paolo Zini (Parmalat's counsel) were used for irregular transactions is pure makeweight. Mr. Zini was a reputable lawyer at the time and there was nothing about the operation of his accounts that suggested he was using them for unlawful purposes. Click here for a detailed response to these allegations and why they are without merit.
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About Citigroup
Citigroup (NYSE: C), the preeminent global financial services company has some 200 million customer accounts and does business in more than 100 countries, providing consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, insurance, securities brokerage, and asset management. Major brand names under Citigroup's trademark red umbrella include Citibank, CitiFinancial, Primerica, Smith Barney, Banamex, and Travelers Life and Annuity.