Citibank (NYSE: C) Wins Major Case Related to Auction-Rate Arbitration

Citigroup (NYSE: C) Global Markets Inc. won a in major arbitration claim that was brought forth by Banco Industrial de Venezuela, over a $118.7 million investment in auction-rate securities.

The Financial Industry Regulatory Authority’s arbitration panel dismissed all claims brought forth by the state-owned bank’s Miami agency against Citigroup Global Markets, which was then doing business as Smith Barney, and denied all of by Banco Industrial de Venezuela’s claims for relief.

A Citibank spokesman commented to the press, “We’re pleased with the decision.”

Banco Industrial De Venezuela’s Miami agency filed its claim in September of 2008, contending that Citi had engaged in fraudulent and negligent misrepresentation, breach of fiduciary duty, Florida civil theft, and other infractions, according to the Finra dispute resolution document. The bank was seeking recover of its $118.7 million investments as well as additional consequential damages that may have incurred because of a lack of liquidity.

Banco Industrial De Venezuela also sought the rescission of the securities and damages based on alleged civil theft totaling $356.1 million, according to the document. The figure listed is likely based on a Florida statute, which allows for tripling of damages.

The Financial Industry Regulatory Authority does not comment on individual arbitration cases, a spokesman said.

The auction rate securities market totaled $330 billion when the market froze in early 2008, when bidders stopped purchasing shares at auctions when the credit crisis deepened. Many investors found themselves stuck in auction-rate securities investments without any buyers available.