In Re Citigroup Inc. Shareholder Derivative Litigation

964 A.2d 106 (Del.Ch. 2009)

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Nature of the Case

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Facts

According to Ps, Citigroup held an alleged $55 billion in subprime exposure. This entire portfolio blew up in their face by 2007. Citigroup held subprime mortgages that had decreased in value, and the normally liquid commercial paper market became illiquid. They had to sell assets at allegedly “fire sale” prices to meet their financial obligations. Ps allege that Ds are liable to the Company for breach of fiduciary duty for (1) failing to adequately oversee and manage Citigroup’s exposure to the problems in the subprime mortgage market, even in the face of alleged “red flags” and (2) failing to ensure that the Company’s financial reporting and other disclosures were thorough and accurate. Ps assert a claim for “reckless and gross mismanagement.” Ps also allege waste for: (1) allowing the Company to purchase $2.7 billion in subprime loans from Accredited Home Lenders in March 2007 and from Ameriquest Home Mortgage in September 2007; (2) authorizing and not suspending the Company’s share repurchase program in the first quarter of 2007, which allegedly resulted in the Company buying its own shares at “artificially inflated prices;” (3) approving a multi-million dollar payment and benefit package for defendant Prince upon his retirement as Citigroup’s CEO in November 2007; and (4) allowing the Company to invest in SIVs that were unable to pay off maturing debt.