Citigroup faces legal action over pension losses
The troubled Citigroup is facing legal action from retirement plan participants for investing $US4bn of their money in its own ‘risky’ stock
Participants in
Citigroup’s
401(k) retirement plans are suing the company and others for sinking a large
part of their funds into the company’s stock and allegedly causing them to lose
more than $US1 billion (?500,000).
The complaint charges the company; Chuck Prince, former chief executive
officer; the plans’ administrative committee; and others with violating US
federal pension law by allowing the ‘imprudent investment’ in Citigroup stock
although they knew it was ‘unduly risky’ because of the company’s ‘serious
mismanagement and improper business practices’, CFO.com reports.
A Securities and Exchange Commission filing yesterday shows USA’s biggest
bank by assets, has funnelled $US7.6bn of emergency financing into the seven
structured investment vehicles (SIVs) it runs after they were unable to repay
maturing debts, drawing on $US10bn of so-called committed liquidity provided by
Citigroup.
The bank may have to write down another $2.7 billion of sub-prime
mortgage-backed and related securities, according to US credit researcher
CreditSights Inc. Citigroup said three days ago that securities it held might
have lost $US11 billion of value.
Further reading:
Rubin, Sir Win take over at Citigroup