Bloomberg News

Citigroup Sued by Moneygram Over Collateralized Debt Losses

November 07, 2011

Nov. 4 (Bloomberg) -- Citigroup Inc. was accused of fraud by Moneygram Payment Systems Inc., the electronic cash-transfer business, in a lawsuit seeking to recover an alleged $140 million in collateralized debt obligation losses.

The bank and two of its units, Citigroup Global Markets Inc. and Citigroup Global Markets Ltd., undertook a “fraudulent scheme” to sell nine mortgage-related CDOs to Moneygram from 2005 to 2007, according to a complaint filed Oct. 26 in state court in Minneapolis. Citigroup allegedly marketed the CDOs as investment grade.

“In reality, however, the CDOs that Citi sold to Moneygram were ‘junk’ on the very day that Citi sold them,” according to the complaint. The CDOs weren’t backed by the promised overcollateralization of assets, Minneapolis-based Moneygram said.

The third-biggest U.S. lender, Citigroup last month agreed to pay $285 million to settle U.S. regulatory claims that it misled investors about the nature of a $1 billion collateralized debt offering in 2007.

“We believe the suit is without merit,” Danielle Romero- Apsilos, a spokeswoman for New York-based Citigroup, said in an e-mail.

The case is Moneygram Payment Systems Inc. v. Citigroup Inc., 27cv11-21348, Hennepin County, Minnesota, District Court (Minneapolis).

--With assistance from Joshua Gallu in Washington. Editors: Andrew Dunn, Stephen Farr

To contact the reporter on this story: Andrew Harris in Chicago at

To contact the editor responsible for this story: Michael Hytha at

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