Citigroup Inc. has settled a litigation brought on behalf of purchasers of Global Crossing Ltd securities to its subsidiary, Salomon Smith Barney in millions of dollars, though it denied any violation of law, reported Dow Jones Newswires.
Citigroup will pay $75 million pretax, or $46million after tax, to the settlment class, which consists of all investors in publicly traded securities of Global Crossing, a former large fiber-optic company or Asia Global Crossing during the period from Feb.1, 1999 to Dec.8, 2003, Dow Jones said.
The case record from the court, the United States District Court for the southern district of New York, showed Salomon's wrongly recommendation and failure to disclose necessary information to the investors, though the report from Dow Jones said only in a sentence that the litigation was related to research matters. The records said that Salomon rose the recommendation to "Buy"in the IPO period in order to obtain high underwriting fee. It also said that the company failed to disclose the conflicts of interests with the Global Crossing Ltd.
Citigroup said it was entering into the settlement "solely to eliminate the uncertainties, burden and expense of further protracted litigation."
Separately, Salomon Smith Barney, the subsidiary group of Citigroup, was the financial advisor to the investment group, including China Netcom, when the group bought Asia Global Crossing, the Asian branch of Global Crossing, at the price of $80 million in November 2002.
Ten months later, Global Crossing was permitted to sell 61.6 per cent of stake to the investors, including the Hong Kong-based Hutchison Whampoa, controlled by Hong Kong billionnaire Li Ka-shing, in the price of $250 million, three times the price of its Asia branch. Citigroup, is one of the two dozen banking lenders helping to arrange the selling, according to New York Times.
Another ten months later, China Netcom, the big investors of Asia Global Crossing, seeked listing approval from Hong Kong stockmarket regulator, while Citigroup is one of the three underwriters.
Last month, China Netcom has bought a 20 percent stake of PCCW(Controlled by Li Ka-shing, too) in HK$7.9billion. It is said that the banks are the activists to push the deal at the first time.
Then I begin to wonder if it would be Citigroup again. If it is, then that's why it doesn't want to waste its time in a possbily losing litigationand get trouble for its beloved cusomers.