Citigroup, Inc (NYSE: C) Affiliates Found Guilty of Mismanaging MAT/ASTA Municipal Arbitrage Funds

Citigroup, Inc (NYSE: C) affiliates lost a case before a Financial Industry Regulatory Authority (FINRA) arbitration panel relating to MAT/ASTA municipal arbitrage products which the firm had sold to investors.

The panel awarded more than $1.8 million to two clients in connection with their purchases of MAT/ASTA investments. The panel found that Respondents Citigroup Global Markets, Inc., formerly known as Citigroup Investment Services, and Citigroup Alternative Investments, LLC had failed to properly supervise employees and negligently mismanaged MAT/ASTA funds.

Two law firms, Robert Wayne Pearce and Atlanta-based Page Perry LLC, have affiliated in order to prosecute future MAT/ASTA claims for clients.

Robert Wayne Pearce stated, “Citigroup sold these products like tickets on the Titanic and, with this ruling, they’re going to pay their victims whose investments they sunk. Citigroup tried the ‘blame the customer defense,’ but blaming the customer does not make sense for Citigroup’s failing to follow its own investment strategy and then sailing MAT/ASTA directly into the storm it saw on the horizon. The negligent management claim now is available to all MAT/ASTA investors, including employees not involved in the management of the funds.”

J. Boyd Page, senior partner of Page Perry LLC, stated, “The award and Bob Pearce’s extraordinary work are particularly noteworthy because the arbitration panel expressly found that Citigroup’s affiliates mismanaged the fund, and also that they failed to supervise employees. Specific findings like those made by the arbitration panel in this case are unusual, and suggest the arbitrators intended to send a message.”

According to a press release, “MAT/ASTA was a series of leveraged municipal arbitrage hedge funds offered by Citigroup Fixed Income Alternatives and sold through Smith Barney and Citigroup Private Bankers. MAT/ASTA was marketed only to high net worth clients of the firm as a fixed income alternative.”

Pearce added, “In truth, the MAT/ASTA funds were risky investments that exposed investors to a 100 percent or more loss of principal. The funds imploded in early 2008 causing catastrophic losses to investors. This award should open the door for many investors to recover the damages they sustained in their MAT/ASTA municipal arbitrage investments.”