Citigroup is facing fresh legal action related to its role as an adviser to
Enron, with investors claiming they were duped by a "massive scheme of
deception" when they bought securities tied to the credit-worthiness of the
bankrupt energy firm. The suit could expose Citigroup to billions more dol lars in liabilities. The
bank was closely linked to a number of the high profile financial scandals of
2002 and in May sharply increased its reserves for legal bills to $6.7bn (pounds
3.7bn). Bank of New York filed the latest lawsuit on behalf of mutual funds and
insurance firms who bought Enron notes called Yosemite securities from Citigroup
with a face value of $2.4bn. It alleges that Citigroup knew Enron's debts were
far higher than it had publicly disclosed. Citigroup, it claims, had at the same time overexposed itself to Enron and
was looking for a way out. The complaint alleges fraud, breach of contract and fiduciary duty and
negligence in the note transactions that took place between 1999 and 2001, when
Enron filed for bankruptcy protection. A Citigroup spokeswoman denied the bank
had engaged in any wrongdoing.
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