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Citigroup (C) & Others Face With Criminal Cartel Charges

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According to Australia’s securities regulator and competition watchdog, Citigroup (C - Free Report) , along with Deutsche Bank AG (DB - Free Report) and Australia & New Zealand Banking Group Ltd., will be sued with criminal charges for alleged “cartel” conduct over the sale of ANZ Bank’s shares worth $1.9 billion in Australia in 2015.

In August 2015, Citigroup, Deutsche Bank and JPMorgan Chase & Co. (JPM - Free Report) were the underwriters for the institutional placement of nearly 80.8 million shares of ANZ Bank, which was conducted to raise capital for meeting regulatory requirements.

However, there were allegations that the joint underwriters, as part of their underwriting commitment, created a cartel arrangement and hence reached an understanding for the disposal of 25.5 million shares that they absorbed as part of the placement. Those 25 million shares represented less than 1% of ANZ Bank’s outstanding shares at that time.

Rod Sims, chairman of the Australian Competition and Consumer Commission (ACCC) said in a statement, “The charges will involve alleged cartel arrangements relating to trading in ANZ shares following an ANZ institutional share placement.”

The ACCC stated that Rick Moscati, ANZ Bank’s group treasurer, will also have to face criminal charges for such misconduct.

Notably, a cartel is an association that is created with the purpose of maintaining prices at a high level and restricting competition.

Denying the charges, ANZ Bank said that Rick Moscati acted lawfully during the placement and the bank would co-operate with authorities.

Also, Deutsche Bank and Citigroup, who were already expecting to be charged for the matter have said that they will be vigorously defending themselves.

Citigroup stated, “This is a highly technical area and if the ACCC believes there are matters to address, these should be clarified by law or regulation or consultation.”

However, JPMorgan did not comment on the matter.

Notably, Citigroup continues to encounter many investigations and lawsuits from investors and regulators. Though the company resolved certain litigations related to the sale of risky mortgage-backed securities and other issues, many of the cases are yet to be resolved. As the company continues to work through its legal issues, we believe, it will continue to witness increased legal expenses and litigation provisions, which will likely hurt its financials.

The company’s shares have gained 9.2% in the past year, underperforming 16.5% growth of the industry.



Citigroup currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the same space is Fifth Third Bancorp (FITB - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company’s Zacks Consensus Estimate for current-year earnings has been revised 5.6% upward over the past 60 days. Also, its shares have gained 29.4% in the past year.

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