Troubles mount for Citigroup Inc. (C - Free Report) as the U.S. Court of Appeals in New York has reinstated the $343.1 million claw-back lawsuit against the bank, filed by Irving Picard, the trustee given the responsibility to recoup the estimated $17.5 billion for Bernard Lawrence Madoff’s victims, which they had lost in his Ponzi scheme.
The $343.1 million represents funds that Citi received between 2005 and 2008 from Rye Select Broad Market Prime Fund LP, a Madoff "feeder fund" that had borrowed from the bank to invest in Bernard L. Madoff Investment Securities LLC. Picard alleged that Citi had accepted the money despite internal conjectures regarding Madoff's trading activity and misleading investment returns.
The second U.S. Circuit Court of Appeals ruled that the lower court judges incorrectly requited Picard to prove Citi’s lack of good faith by being "willfully blind" to "red flags", alleging a high possibility of deceit.
It said that the appropriate standard was whether the banking giant knew "suspicious facts" about Madoff that would have caused a reasonable investigation.
A lawyer representing Picard, Seanna Brown, stated in a statement that the decision was an "important victory" for Madoff’s victims, thereby aiding the trustee to reclaim $3.75 billion on top of the nearly $14.5 billion already recovered.
Brown also said that the decision affected about 90 lawsuits, and should help bring victims "as close as possible to recovering 100% of their losses."
In 2008, Madoff was arrested and was sentenced to 150 years in prison after admission of stealing more than $19 billion in history’s biggest Ponzi scheme. He died in a federal prison in April 2021.
Our Take
Despite taking measures to combat the rise in expenses, Citigroup’s involvement in litigation issues might keep legal costs elevated. Nonetheless, it is committed to executing its growth strategies, and continues to make steady progress toward its financial targets.
Shares of the company have gained 3.1% over the past six months compared with 11.5% growth recorded by the industry.
Citigroup currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Several banks continue to encounter legal probes and are charged with huge sums of money for business malpractice. This May, Bank of America (BAC - Free Report) agreed to pay a penalty of $75 million in order to settle an excessive fees probe.
In the same month, the Consumer Financial Protection Bureau investigated Wells Fargo & Company’s (WFC - Free Report) practice of freezing consumer deposit accounts. The probe was based on suspicions of fraudulent activity by any third party or account holder.
The U.S. Department of Justice stated in May that State Street Corporation (STT - Free Report) entered a deferred prosecution agreement and agreed to pay a criminal fine of $115 million to settle charges that accused it of deceiving its clients by secretly overcharging them for back-office expenses.
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Troubles mount for Citigroup Inc. (C - Free Report) as the U.S. Court of Appeals in New York has reinstated the $343.1 million claw-back lawsuit against the bank, filed by Irving Picard, the trustee given the responsibility to recoup the estimated $17.5 billion for Bernard Lawrence Madoff’s victims, which they had lost in his Ponzi scheme.
The $343.1 million represents funds that Citi received between 2005 and 2008 from Rye Select Broad Market Prime Fund LP, a Madoff "feeder fund" that had borrowed from the bank to invest in Bernard L. Madoff Investment Securities LLC. Picard alleged that Citi had accepted the money despite internal conjectures regarding Madoff's trading activity and misleading investment returns.
The second U.S. Circuit Court of Appeals ruled that the lower court judges incorrectly requited Picard to prove Citi’s lack of good faith by being "willfully blind" to "red flags", alleging a high possibility of deceit.
It said that the appropriate standard was whether the banking giant knew "suspicious facts" about Madoff that would have caused a reasonable investigation.
A lawyer representing Picard, Seanna Brown, stated in a statement that the decision was an "important victory" for Madoff’s victims, thereby aiding the trustee to reclaim $3.75 billion on top of the nearly $14.5 billion already recovered.
Brown also said that the decision affected about 90 lawsuits, and should help bring victims "as close as possible to recovering 100% of their losses."
In 2008, Madoff was arrested and was sentenced to 150 years in prison after admission of stealing more than $19 billion in history’s biggest Ponzi scheme. He died in a federal prison in April 2021.
Our Take
Despite taking measures to combat the rise in expenses, Citigroup’s involvement in litigation issues might keep legal costs elevated. Nonetheless, it is committed to executing its growth strategies, and continues to make steady progress toward its financial targets.
Shares of the company have gained 3.1% over the past six months compared with 11.5% growth recorded by the industry.
Citigroup currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Several banks continue to encounter legal probes and are charged with huge sums of money for business malpractice. This May, Bank of America (BAC - Free Report) agreed to pay a penalty of $75 million in order to settle an excessive fees probe.
In the same month, the Consumer Financial Protection Bureau investigated Wells Fargo & Company’s (WFC - Free Report) practice of freezing consumer deposit accounts. The probe was based on suspicions of fraudulent activity by any third party or account holder.
The U.S. Department of Justice stated in May that State Street Corporation (STT - Free Report) entered a deferred prosecution agreement and agreed to pay a criminal fine of $115 million to settle charges that accused it of deceiving its clients by secretly overcharging them for back-office expenses.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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