Securities Regulators Open New Investigations into Citigroup’s ASTA/MAT Municipal Arbitrage Funds and Other Purported Fixed Income-Related Products
As reported by Bloomberg on Friday, August 3, 2012, in footnote 22 to the financial statements for its Form 10-Q for the second quarter ended June 30, 2012, Citigroup included the following new disclosures relating to the firm’s fixed-income products that were marketed under the names of ASTA, MAT & Falcon:
ASTA/MAT and Falcon-Related Litigation and Other Matters
State Attorney General Subpoenas: On June 11, 2012, the New York Attorney General served a subpoena on a Citigroup affiliate seeking documents and information concerning MAT Finance Fund LLC, ASTA Finance Fund LLC, and Falcon Strategies LLC. On August 1, 2012, the Massachusetts Attorney General served a Civil Investigative Demand on a Citigroup affiliate seeking similar documents and information. Citigroup is cooperating fully with these inquiries.
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The parties in Hosier v. Citigroup Global Markets, Inc. have reached an agreement to settle the action, pursuant to which Citigroup has voluntarily dismissed its appeal in the United States Court of Appeals for the Tenth Circuit. Additional information relating to this matter is publicly available in court filings under docket numbers 11 Civ. 971 (D. Colo.) (Arguello, J.) and 12-1018 and 12-1132 (10th Cir.).
The latter disclosure relates to a FINRA arbitration proceeding in which the investors had been jointly represented by Steven B. Caruso of the New York City office of Maddox, Hargett & Caruso, P.C. and Philip M. Aidikoff & Ryan K. Bakhtiari of the Beverly Hills, California office of Aidikoff, Uhl & Bakhtiari.
As reported on April 13 by the Wall Street Journal, the $54 million award is the largest ever levied against a major Wall Street brokerage in favor of individual investors and also included an assessment against Citigroup of $17 million in punitive damages, which is believed to be one of the largest awards of punitive damages in the history of securities arbitration. In addition, the award held Citigroup liable for the investors’ expert witness fees, certain other arbitration-related expenses and all of the FINRA forum fees associated with the administration of the arbitration proceeding.