Norway’s central bank has sued Citigroup for alleged misstatements over the company’s financial condition before the financial crisis, which it claims caused heavy losses to the Norwegian sovereign wealth fund.

In a lawsuit filed in New York, Norges Bank alleged that it lost $835m because Citigroup failed to fully reveal the financial risks it was facing – particularly from investments in subprime mortgages.
The suit names Vikram Pandit, the group’s current chief executive, and Chuck Prince, his predecessor, among the defendants.
“Due to the defendants’ repeated material untrue statements and non-disclosure of material information to investors, plaintiff purchased Citi securities at inflated prices
[between January 2007 and January 2009],” the lawsuit said.
“When the market slowly learned the truth of Citi’s financial condition, Citi came close to insolvency, and plaintiff lost a substantial amount of its investment.”
Citi denied the allegations. “We believe the suit has no merit and will defend ourselves vigorously,” said Danielle Romero-Apsilos, a Citigroup spokeswoman.
Norges Bank invested in Citigroup in its role as manager of Norway’s $440bn “oil fund” – the world’s second-largest sovereign wealth fund after Abu Dhabi’s.
The Norwegian fund, into which the country invests its oil wealth for future generations, lost 23 per cent of its value in 2008 as global markets plummeted but has since recovered most of the losses.
The lawsuit is the latest in a series of legal actions against Citigroup and other big U.S. institutions from investors who lost money in the financial crisis.
Last year, the Abu Dhabi Investment Authority filed an arbitration against Citigroup accusing the US bank of misleading it over a $7.5bn investment the fund made in the bank in 2007.
The Abu Dhabi fund alleged “fraudulent misrepresentations in connection with the sale” and sought “rescission of the investment agreement or damages in excess of $4bn”. Citigroup said the allegations were without merit.
The latest lawsuit was not the first against Citigroup from Norway.
Last year, seven Norwegian municipalities sued Citigroup over the sale of more than $115m in derivatives in 2007.
(Source: Financial Times)