Tuesday, June 30, 2009

USA: A case against Citi concerning WorldCom has been revived

[law.com] Reach deep into the cobwebby memories of the Enron era and you may recall the name Jack Grubman. He was Salomon Smith Barney's star telecom analyst, a supposed savant who made $20 million a year, moved markets with his words, and finagled to get his kids into the New York City nursery school of his choice. Then the telecom market collapsed and Grubman resigned in disgrace as regulators began to look closely at his relationship with executives at fraud-ridden WorldCom. Grubman's enthusiastic touting of WorldCom stock, even as the company lost billions in market capitalization, was a big reason Salomon's parent, Citigroup, paid a whopping $2.65 billion to settle claims from WorldCom shareholders and bondholders back in 2004.

But it turns out that Citi hasn't heard the last of Jack Grubman and his ties to WorldCom. On Wednesday the U.S. Court of Appeals for the 2nd Circuit revived a case filed by an investor group that opted out of Citi's 2004 deal with investors. In an 18-page opinion written by Judge Jose Cabranes, the appellate court ruled that Manhattan federal district court judge Denise Cote erred when she dismissed three Georgia state law-based claims by William Holmes and related investors. (The 2nd Circuit affirmed her dismissal of other claims and her refusal to permit plaintiffs to file a third amended complaint.)

2nd Circuit Revives $200 Million WorldCom Investor Case Against Citi
see also opinion

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