Citigroup beats $800 mln appeal by onetime billionaire

By Jonathan Stempel
Reuters

NEW YORK, Aug 5 (Reuters) - A federal appeals court rejected a one-time Florida billionaire's bid to revive his $800 million lawsuit accusing Citigroup Inc of fraudulently hiding its exposure to subprime and other toxic mortgages, inducing him to hold on to shares he otherwise would have sold.

The 2nd U.S. Circuit Court of Appeals in Manhattan on Friday said Citigroup and former officials, including two chief executives Charles Prince and Vikram Pandit, were not liable to trusts and corporate entities overseen by Arthur Williams and his wife.

Lawyers for the Williamses did not immediately respond to requests for comment. Citigroup spokeswoman Danielle Romero-Apsilos said the bank was pleased with the decision.

Williams, the founder of what became Primerica Financial Services, has said he had planned in May 2007 to sell his 17.6 million Citigroup share stake, but decided to sell just 1 million because the bank assured investors it was in good shape.

It was not until March 2009 that he finally sold the rest at $3.09 each, costing him "the financial benefit of his life's work," court papers show.

He sued for the difference between that price and the $51.59 price prevailing in May 2007.

But the appeals court called the damages "too undeterminable and speculative," saying Williams could only hypothesize what the stock price might have been at a given time had New York-based Citigroup disclosed its exposures sooner.

Citigroup ultimately lost $27.68 billion in 2008, and underwent a series of federal bailouts that have since been repaid.

Pandit and the bank's current Chief Executive Michael Corbat have spent years shedding troubled assets.

Citigroup, once the largest U.S. bank by assets, now ranks fourth.

Friday's decision upheld an October 2013 ruling by U.S. District Judge Sidney Stein in Manhattan.

The decision was delayed because the appeals court asked the Supreme Court in Delaware, where Citigroup is incorporated, whether Williams should have sued on behalf of the bank and other shareholders, in a so-called derivative lawsuit.

In May, Chief Justice Leo Strine in Delaware said the claims were "direct" because "they belong to the holders and are ones that only the holders can assert."

The case is AHW Investment Partnership et al v. Citigroup Inc, 2nd U.S. Circuit Court of Appeals, No. 13-4488. (Reporting by Jonathan Stempel in New York; Editing by Bernadette Baum)

08/05/2016 11:46