Case 1:10-cv-07202-UA Document 1 Filed 09/17/10 Page 1 of 221
i
TABLE OF CONTENTSPage
I. NATURE AND SUMMARY OF THE ACTION..............................................................1II. JURISDICTION AND VENUE.........................................................................................9III. THE PARTIES..................................................................................................................10A. P
LAINTIFF
..............................................................................................................10B. D
EFENDANTS
.........................................................................................................111. Citigroup Defendants................................................................................112. Individual Defendants...............................................................................12IV. SECURITIES PURCHASED BY PLAINTIFF...............................................................18V. BACKGROUND ALLEGATIONS PERTINENT TO ALL COUNTS...........................28A. S
UBPRIME
M
ORTGAGES
B
ECOME
A
TTRACTIVE
T
O
L
ENDERS
................................28B. T
HE
P
ROLIFERATION
O
F
F
INANCIAL
I
NSTRUMENTS
B
ACKED
B
Y
U.S.
R
ESIDENTIAL
M
ORTGAGES
....................................................................................30C. C
ITIGROUP
’
S
I
NVOLVEMENT
I
N
M
ORTGAGE
-R
ELATED
A
CTIVITIES
.......................341. Subprime Lending Fuels Citi’s Bottom Line............................................342. Citi’s Mortgage Portfolio Included Large Volumes Of SubprimeAnd Other Risky Loans............................................................................343. Citigroup’s CDOs.....................................................................................354. Citigroup’s SIVs.......................................................................................375. Citigroup’s ARS........................................................................................39D. I
NDICATORS
T
HAT
M
ORTGAGE
M
ARKETS
W
ERE
D
ETERIORATING
B
Y
2005.........41E. I
NDICATORS
T
HAT
S
ECONDARY
M
ARKETS
F
OR
MBS
A
ND
CDO
S
W
ERE
D
ETERIORATING
B
Y
J
ANUARY
2007......................................................................44VI. DEFENDANTS MISREPRESENTED CITI’S FINANCIAL POSITION ANDRESULTS, AND FAILED TO DISCLOSE MATERIAL INFORMATIONREGARDING THE RISKS AND LOSSES TO WHICH CITI WAS EXPOSED..........47
Case 1:10-cv-07202-UA Document 1 Filed 09/17/10 Page 2 of 221
iiA. D
EFENDANTS
D
ID
N
OT
D
ISCLOSE
T
HE
N
ATURE
A
ND
E
XTENT OF
C
ITI
’
S
CDO
E
XPOSURES
...................................................................................................47B. C
ITIGROUP
’
S
F
INANCIAL
S
TATEMENTS
D
URING
T
HE
R
ELEVANT
P
ERIOD
W
ERE
M
ATERIALLY
U
NTRUE
A
ND
V
IOLATED
GAAP
AND
SEC
R
EGULATIONS
........................................................................................................471. Citigroup Reported Materially Understated Loan Loss Reserves InViolation Of GAAP..................................................................................542. Citigroup Failed To Disclose Massive Concentrations Of CreditRisk From Subprime-Related Assets In Violation Of GAAP..................603. Citigroup Failed To Consolidate Its SIVs On Its Balance Sheet InViolation Of GAAP..................................................................................634. Citigroup Failed To Consolidate Its Commercial Paper CDOs InViolation Of GAAP..................................................................................715. Citigroup Overstated The Fair Value Of Its Subprime-relatedCDOs In Violation Of GAAP...................................................................746. Citigroup Overstated The Fair Value Of Its Total Assets InViolation Of GAAP..................................................................................847. Citigroup Failed to Disclose Its Exposures to Illiquid Auction RateSecurities...................................................................................................868. Citigroup Overstated Its Capital Adequacy..............................................93C. D
EFENDANTS
P
RINCE
,
P
ANDIT
A
ND
C
RITTENDEN
S
IGNED
F
ALSE
S
ARBANES
-O
XLEY
C
ERTIFICATIONS
......................................................................94D. A
DDITIONAL
U
NTRUE
S
TATEMENTS
A
ND
O
MISSIONS
...........................................94VII. THE TRUE FACTS ARE SLOWLY REVEALED.......................................................119A. O
CTOBER
2007:
C
ITIGROUP
M
AKES
P
ARTIAL
B
UT
I
NCOMPLETE
D
ISCLOSURES
C
ONCERNING
I
TS
G
ROWING
L
OSSES
A
ND
S
UBPRIME
E
XPOSURE
............................................................................................................1191. October 1: Citi Issues Pre-Earnings Release.........................................1192. October 15, 2007: Citi Announces Third Quarter Results.....................121B. E
ARLY
F
ALL
2007:
C
ITI
M
AKES
P
ARTIAL
B
UT
I
NCOMPLETE
D
ISCLOSURES
R
EGARDING
I
TS
SIV
E
XPOSURE
...........................................................................122
Case 1:10-cv-07202-UA Document 1 Filed 09/17/10 Page 3 of 221
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Norges Bank's Complaint Against Citigroup
Norges Bank's lawsuit against Citigroup over $835 million in investment losses.
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