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Monday, February 26, 2024 | Back issues
Courthouse News Service Courthouse News Service

Citigroup Safe, for Now, From Billionaire’s Suit

MANHATTAN (CN) - Real estate developer Sheldon H. Solow, known for his iconic Manhattan tower at 9 W. 57th St., must go back to the drawing board if he wants to sue Citigroup and its CEO Vikram Pandit for allegedly lying about liquidity during the 2008 financial collapse, a federal judge ruled.

On Sept. 15, 2008, Lehman Brothers filed for bankruptcy, causing the Dow Jones Industrial Average and Citigroup shares to plummet.

"On that same day, in an alleged effort to boost investor confidence, Citigroup CEO Pandit issued a memorandum to Citigroup employees I which was reprinted in The Wall Street Journal. The memorandum allegedly urged employees to 'remind our clients and shareholders' that Citigroup's 'capital ratio' was 'well in excess of the 'well-capitalized' regulatory minimums' and that Citigroup's 'cash position is very strong.' ... The memorandum also stated that 'Citigroup continues to boast a strong deposit base that is diversified across products and regions,'" the Southern District of New York summarized.

Solow claimed that he bought tens of thousands of shares of Citigroup stock, based on these promises.

On Sept. 30, 2008, Solow says he bought 10,000 shares at $21.02 per share, for an aggregate price of $210,239.

On Nov. 12, 2008, he says he bought another 30,000 shares at $9.88 per share, for an aggregate price of $299,421.

He sued for violation of securities law and common law fraud on April 5, 2010.

U.S. District Judge Robert Sweet dismissed the complaint Tuesday, but left the window open for Solow to file other claims against the bank regarding its statements about liquidity.

"By describing how Citigroup allegedly touted its strong liquidity while not disclosing large borrowings from a lending facility authorized by the Federal Reserve designed to help banks in distress, the [first amended complaint] pleads sufficient facts to establish alleged material misstatements and omissions made by the Defendants with respect to the issue of Citigroup's liquidity," the 32-page order states.

Sweet added that Solow failed to adequately claim that Citigroup misled investors about its capital strength, or that it lied about the reason behind acquiring Wachovia.

Solow has 20 days to replead his claims.

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