Mutual-Fund Suit Vs Citigroup Dismissed
Business Law
[##_1L|1062093828.jpg|width="120" height="88" alt=""|_##]A federal judge in New York on Wednesday dismissed a lawsuit against Citigroup Inc. that alleged it didn't disclose to mutual-fund customers millions of dollars in savings allegedly pocketed by its asset-management business. In an order Wednesday, U.S. District Judge William H. Pauley III in Manhattan dismissed claims by investors in the Smith Barney family of funds against Smith Barney Fund Management LLC and Citigroup Global Markets Inc., which are part of Citigroup Asset Management. The judge gave the investors the right to replead some claims by Oct. 19.
The judge also dismissed claims against Thomas W. Jones, the former chief executive of Citigroup Asset Management, and Lewis E. Daidone, the former treasurer and chief financial officer of the Smith Barney family of funds.
"It is undisputed that defendants disclosed the amount of fees paid by the funds. Thus, plaintiffs were in possession of all material information, i.e., they knew the value of the funds," the judge said in a nine-page opinion.
The consolidated lawsuit alleged that Citigroup's asset-management business took most of the benefit of a discount from using an affiliated transfer agent for itself, pocketing more than $90 million, rather than passing on those savings to the mutual funds and their customers.
In February, another federal judge in Manhattan dismissed a similar case brought by the Securities and Exchange Commission against Jones and Daidone. Citigroup itself settled the SEC's charges in May 2005 and agreed to pay $208 million to affected mutual-fund customers. In settling, the financial-services company didn't admit or deny wrongdoing.
A lawyer for the investors and a Citigroup spokesman didn't immediately return phone calls seeking comment Wednesday.
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