Legal woes continue to persist at Citigroup Inc. C. The 12-year suit by Allied Irish Banks Plc (AIB) that accused the New York based banking giant of helping rogue currency trader John Rusnak hide around $691 million loss, is seeking $872 million from Citigroup. A trial is expected to commence on Jan 25, 2016.
In 2003, AIB, which is now 98% owned by the Irish State, had sued Citibank – the subsidiary of Citigroup, and Bank of America Corporation BAC, claiming that the banks were involved in a trading scheme that resulted in huge losses for Allfirst Financial Inc, a former unit of AIB.
The lawsuit alleged that in September 2000, Bank of America and Citibank opened prime brokerage accounts for Rusnak, through which he traded foreign currency. Allegedly, the two banks helped Rusnak hide his increasing losses by removing information in reports to Allfirst. While the case against Bank of America was settled in 2012, AIB continues to pursue its proceedings against Citibank.
When in 2002 Rusnak’s years of concealed losses came to light, the scandal was one of the largest involving rogue trading cases at that time. Notably, in October 2002 Rusnak pleaded guilty to bank fraud. He served almost six years of his seven-and-a-half years in prison term and was released in January 2009. AIB sold Baltimore-based Allfirst to M&T Bank Corporation MTB in 2003.
According to a recent Bloomberg report, citing a Nov 16 court filing, AIB, of the total amount, is demanding $372 million in damages in the nearing trial against Citigroup and around $500 million “in pre-judgment interest.”
However, Citibank mentioned in court documents that no employees “committed a fraud or aided and abetted the fraud of anyone else”. The bank further added, “After years of discovery that included 130 depositions and the exchange of hundreds of thousands of documents, the plaintiff has been unable to produce a single document or witness evidencing any Citi employees’ knowledge of or participation in the fraud.”
Citigroup currently carries a Zacks Rank #4 (Sell). E*TRADE Financial Corporation ETFC is a better-ranked stock in the finance space with a Zacks Rank #1 (Strong Buy).
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