Citigroup has been hit with a $30 million auction-rate securities lawsuit filed by Braintree Laboratories, Inc., a specialty pharmaceutical company, reported Christine Caufield in an April 17, 2009 article posted on Law360.com. The suit comes less than two weeks after Texas Instruments Inc. filed a similar suit in Texas state court (Dallas County) against Citigroup Global Markets and others alleging misrepresentations relating to the sale of auction-rate securities. Braintree’s suit also follows an auction-rate securities lawsuit by two financial firms – Ocwen Financial Corp. and Bankruptcy Management Solutions Inc. ? against Citigroup filed in the U. S. District Court for the Southern District of Florida, according to the article.
Braintree’s suit was filed against Citigroup Global Markets, Inc. and Citi Smith Barney in the U. S. District Court for the District of Massachusetts, Civil Action No. 1:09-cv-10601-NMG. The complaint alleges that Citigroup sold the auction-rate securities to Braintree without identifying them as such, instead characterizing them as government-backed money market investments that could be sold at par at any time on seven days notice. In reality, Braintree alleges, these instruments were illiquid auction-rate securities, were subject to failed auctions, and were not redeemable until the year 2030. The complaint further alleges that while facing criminal and administrative investigations into its fraudulent sales of auction-rate securities, Citigroup concealed from regulators and customers its continued sales of such toxic instruments and also destroyed relevant evidence of its wrongdoing.
Investors who still continue to hold auction-rate securities without taking action should appreciate that they are exposed to potentially significant losses in the long run. These investors should carefully weigh the pros and cons of disposing of their auction-rate securities in the secondary market for less than face value, and seeking legal redress for the difference in value. As painful as it is to realize a partial loss, it is wise to consider steps that may prevent a total and permanent loss.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. Page Perry’s attorneys are actively involved in representing institutional and corporate investors in auction-rate securities cases. For further information, please contact us.