Citigroup Inc. ( C ) recently won a legal
order to block an arbitration case filed by a Saudi Arabian
investor, Ghazi Abbar. Abbar, along with his father, had filed a
$383 million case in 2011, charging Citigroup Global Markets Inc.
of mishandling the investments made by his family.CITIGROUP INC (C): Free Stock Analysis ReportDEUTSCHE BK AG (DB): Free Stock Analysis ReportJPMORGAN CHASE (JPM): Free Stock Analysis
ReportSTATE ST CORP (STT): Free Stock Analysis ReportTo read this article on Zacks.com click here.
After an 8-day trial in Manhattan court, U.S. District Judge Louis
Stanton granted an injunction blocking Abbar from arbitrating the
case before the Financial Industry Regulatory Authority
The lawsuit filed by Abbar and his father claimed that they
incurred losses in their investment due to Citigroup's
irresponsible and fraudulent behavior. The agreement, according to
them, was prearranged to capitalize on their investment and make
profits for the company.
In the later half of 2005, Abbar entered into a complex investment
transaction with Citigroup after his family moved assets from
Deutsche Bank AG ( DB ) to Citigroup.
Under the agreement, Abbar placed $343 million of their hedge fund
investment assets into Citigroup as part of a set of intricate
leveraged option transactions. However, the plaintiffs alleged that
the investment malfunctioned during the financial crisis, causing a
loss of $383 million.
After the filing of the arbitration, Citigroup appealed for the
discontinuation of the lawsuit. The bank claimed that Abbar was not
a client of its broker-dealer segment, and the transactions were
made instead by non-U.S. Citigroup units.
Lawsuits pertaining to whether an individual qualifies as a client
have become common with complainants seeking to recuperate losses
incurred during the financial crisis. Some of these claimants
prefer FINRA over courts because court proceedings often drag for
years. Moreover, arbitrations are difficult to get reversed as
compared to a ruling in a federal court.
However, Stanton ruled that Abbar did not legally qualify as a
customer of Citigroup Global Markets Inc. - a subsidiary of
Citigroup - as his account was with the London-based unit, and not
the N.Y. unit.
Citigroup's credentials have been tainted by mounting litigation
worries in recent times, which are proving to be an overhang on
financials. However, the abovementioned ruling is a relief for the
Citigroup currently carries a Zacks Rank #3 (Hold). Better
performing banks include State Street Corporation
( STT ) and
JPMorgan Chase & Co. ( JPM ). Both these carry
a Zacks Rank #2 (Buy).