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Date Issue Title
10th Jun 2005 Fraud Investigation Citigroup pays $2bn in Enron case

Report
US banking giant Citigroup has agreed to pay $2bn (1.1bn) to settle a lawsuit brought by shareholders of collapsed energy trading firm Enron.

The class-action suit accused Citigroup of assisting Enron to carry out the huge accounting fraud which bankrupted it in 2001.

Citigroup did not admit liability, and said money already set aside for legal costs would cover the payment.

Citigroup paid Worldcom investors $2.6bn to settle another suit in 2004.

Charles Prince, the bank's chief executive, said the bank was keen to resolve cases like this one.

"We have an ambitious agenda for Citigroup's future growth," he said. "It is a key priority for Citigroup... to put a difficult chapter in our history behind us."

The investors who stand to gain from the deal are those who bought shares and debt issued by Enron between September 1997 and December 2001, the time at which the firm declared itself bankrupt.

Enron was later found to have inflated its earnings and hidden debt by secreting it in a web of offshore companies.

Investors accused Citigroup and a number of other institutions - including JP Morgan Chase, Barclays, Credit Suisse First Boston, the Canadian Imperial Bank of Commerce and Deutsche Bank - of helping with the fraud.

Leading the way is the University of California, whose board of regents still needs to ratify the settlement - as does Citigroup's board of directors.

Legal action continues against the other defendants.

"I certainly anticipate that we would see several other large settlements," said William Lerach, lawyer for the university.

Observers voiced satisfaction that Citigroup was settling the case - but also concern at what it said about the bank's practices.

"Clearly it is not going to have an impact on financials," said Richard Bove, analyst at Punk Ziegel in Florida.

"But the setback is that... it raises issues with regard to credibility of business processes at Citigroup."

Citigroup has found itself embroiled in a number of incidents recently where its ethics have been called into question.

In Japan, it was forced to give up private banking after branches were accused of cutting corners in a way which could have allowed money laundering.

And in August 2004, its bond traders sold a huge tranche of European government bonds only to buy them back minutes later when the price plummeted.

Several market watchdogs across the continent staged investigations, and Germany at one point even considered prosecution for market manipulation - although it eventually decided the bank did not have to answer to the charge.

The bank now says it has taken aggressive action to correct any oversights and inculcate a more ethical culture.

Other Reports on CitiGroup
Date Issue Company Report
7th Aug 2008 Questionable Practice CitiGroup Citigroup reaches SEC settlement
10th May 2006 Other Issue CitiGroup Citibank overcharged customers in Japan
28th Jun 2005 Other Issue CitiGroup Citigroup fined 14m by UK watchdog
25th Jan 2005 Fraud Investigation CitiGroup Criminal probe on Citigroup deals
4th Oct 2004 Fraud Investigation CitiGroup South Korea to scrutinise Citigroup
17th Sep 2004 Questionable Practice CitiGroup Japan closes Citigroup branches
11th May 2004 Fraud Investigation CitiGroup Citigroup settles Worldcom claims
19th Jun 2003 Other Issue CitiGroup Citicorp Brokerage Executive Fired

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