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Citigroup Inc (NYSE: C)
March 17, 2005
Citigroup Brings Claim Against Parmalat's Extraordinary Commissioner
New York/London/Milan - Citigroup (NYSE: C) today filed in New Jersey State Court its "Answer and Counterclaims" to the August 2004 suit brought by the Extraordinary Commissioner of Parmalat, Enrico Bondi.
To compensate it for its losses, Citigroup is bringing claims against Dr. Bondi, as Parmalat's representative, for fraud, negligent misrepresentation, conversion of certain moneys due to Citigroup and for a declaratory judgment that Parmalat breached warranties that it had made relating to the securitization program.
"Citigroup is a victim of Parmalat's fraud and has lost more than 500 million Euros as a result," said William J. Mills, Chief Executive Officer of Citigroup's corporate and investment bank in Europe, Middle East, and Africa.
The Answer describes some of the many fraudulent activities Parmalat and its senior executives undertook to hide its growing mountain of debt. These activities by Parmalat included:
- Inventing assets in a fictitious Cayman Islands hedge fund;
- Forging documents to make it appear that Parmalat had $4.9 billion in a Bank of America account;
- Recording a fictitious sale of 300,000 tons of powdered milk to Cuba;
- Booking false bond buy-backs;
- Manipulating goodwill attributable to Parmalat subsidiaries and misrepresenting the value of trademarks.
The Answer describes numerous specific instances in which Parmalat lied to Citigroup about its true financial condition, including statements that senior Parmalat executives made in face-to-face meetings with Citigroup employees. The Answer shows that Parmalat also repeatedly lied about its true financial condition in its financial statements, in press and other public statements, and to regulators and ratings agencies.
The Answer describes the true nature of Citigroup's relationship with Parmalat - an arm's length relationship that consisted of a range of routine and legitimate commercial activities. Not even Dr. Bondi contends that there was anything improper about the vast majority of these transactions. Citigroup only did business with Parmalat because it relied on the statements Parmalat had made about its financial condition and on its globally recognised status as a reputable, investment-grade listed multi-national.
"If Citigroup had known the truth, it would not have done business with Parmalat," Mr. Mills said.
The Answer rebuts the allegations about the three transactions that Dr. Bondi wrongly contends were made to help Parmalat misstate its books. It shows that all three Parmalat transactions with Citigroup were legitimate financial arrangements and that public accounting disclosures were made. In the instance of the securitization agreement - a standard transaction conducted by banks all over the world - Citigroup was the victim of a fraudulent scheme whereby Parmalat sold receivables - some of which Parmalat had already cancelled unbeknownst to Citigroup - in violation of specific contractual warranties it had made.
As is required under U.S. Law, the Answer responds to the specific allegations in the Complaint paragraph by paragraph. The Answer also includes various legal defenses that Citigroup is asserting in this action.
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Citigroup (NYSE: C), the leading 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. Additional information may be found at www.citigroup.com.