Terra Securities, a Norwegian firm, and seven Norwegian municipalities have filed a lawsuit against Citigroup Inc. (C) claiming more than $200 million in damages after they lost millions of dollars on investments sold by the company two years ago.
The complaint alleges that Citigroup misrepresented and sold more than $115 million of structured notes as a conservative investment. Citigroup had indicated that the notes were linked to a municipal bond arbitrage fund in May and June, 2007. However, by May 2008, nearly all the original investment was gone and Terra was in bankruptcy, according to the claim.
The court document alleges that Citigroup sold the notes with an intention to free itself from significant risk from either its own or its preferred customers’ balance sheets. Terra and the town investors had borrowed money to buy the notes but were not able to repay the loan amount as a result of losses from the notes.
The New York law firm Kasowitz, Benson, Torres & Friedman is acting on behalf of Terra and the seven municipalities: Bremanger, Hattfjelldal, Hemnes, Kvinesdal, Narvik, Rana and Vik.
Citigroup, however, has condemned the lawsuit and said that it lacks merit.
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