Being an enormous financial services group means being in lots of business and countries. As Citigroup is finding, it also means rarely missing involvement in a financial scandal. After allegations of warped equity research, Global Crossing, Enron, Worldcom,. the New York City pension fund securities lending losses and tangential involvement in the mutual fund timing scandal, along comes Parmalat to trouble the in-house lawyers at Citigroup as well.
Yesterday a US class-action law firm named Citigroup alongside auditors Deloitte & Touche Tohmatsu and Grant Thornton as defendants in a lawsuit filed against the Parmalat food group on behalf of a US pension fund. The lawsuit is the first of many likely to be brought by US investors in Parmalat securities. The group’s bonds are trading at about 20 per cent of face value and its nearly worthless stock is suspended indefinitely. Although it is not obvious why Citigroup is named in the law suit, reports suggest the bank’s ties to Parmalat include helping to create a special purpose vehicle – the “Black Hole,” or “Buconero” in Italian – used for intra-group loans at Parmalat.