Citigroup Inc.

court filings under docket number 08-01420 (Bankr. S.D.N.Y.) (Peck, J.).Additional information relating to the Chapter 11 bankruptcy proceedings ofLBHI and its subsidiaries, captioned IN RE LEHMAN BROTHERS HOLDINGSINC., is publicly available in court filings under docket number 08-13555(Bankr. S.D.N.Y.) (Peck, J.).Citigroup and Related Parties also hold as custodians approximately$2 billion of proprietary assets and cash of LBHI subsidiary Lehman BrothersInternational (Europe) (LBIE), currently in insolvency administration in theUnited Kingdom. Citigroup and Related Parties have asserted a contractualright to retain the proprietary assets and cash as security for amounts owedto Citigroup and Related Parties by LBIE and its affiliates (including LBHIand LBI), which the administrators for LBIE have disputed. Additionalinformation relating to the U.K. administration of LBIE is available atwww.pwc.co.uk/eng/issues/lehman_updates.html.Terra Firma LitigationPlaintiffs, general partners of two related private equity funds, filed acomplaint in New York state court (later removed to the Southern Districtof New York) against certain Citigroup entities in December 2009, allegingthat during the May 2007 auction of the music company EMI, Citigroup,as advisor to EMI and as a potential lender to plaintiffs’ acquisition vehicleMaltby, fraudulently or negligently orally misrepresented the intentionsof another potential bidder regarding the auction. Plaintiffs alleged that,but for the oral misrepresentations, Maltby would not have acquired EMIfor approximately 4.2 billion British pounds. Plaintiffs further allegedthat, following the acquisition of EMI, certain Citigroup entities tortiouslyinterfered with plaintiffs’ business relationship with EMI. Plaintiffs soughtbillions of dollars in damages. On September 15, 2010, the district courtissued an order granting in part and denying in part Citigroup’s motionfor summary judgment. Plaintiffs’ claims for negligent misrepresentationand tortious interference were dismissed. On October 18, 2010, a jury trialcommenced on plaintiffs’ remaining claims for fraudulent misrepresentationand fraudulent concealment. The court dismissed the fraudulentconcealment claim before sending the case to the jury. On November 4,2010, the jury returned a verdict on the fraudulent misrepresentation claimin favor of Citigroup. Judgment dismissing the complaint was enteredon December 9, 2010. Plaintiffs have appealed the judgment. Additionalinformation regarding the action is publicly available in court filings underdocket number 09 Civ. 10459 (S.D.N.Y.) (Rakoff, J.).KIKOsSeveral local banks in Korea, including a Citigroup subsidiary (CKI), enteredinto foreign exchange derivative transactions with small and mediumsizeexport businesses (SMEs) to enable the SMEs to hedge their currencyrisk. The derivatives had “knock-in, knock-out” features. Following thedevaluation of the Korean won in 2008, many of these SMEs incurredsignificant losses on the derivative transactions and filed civil lawsuitsagainst the banks, including CKI. The claims generally allege that theproducts were not suitable and the risk disclosure was inadequate. As ofDecember 31, 2010, 80 civil claims had been made by SMEs against CKI. Todate, 55 decisions have been rendered at the district court level, and CKI hasprevailed in 47 of those decisions. In the other eight decisions, the plaintiffwas awarded only a portion of the damages it sought. Damage awards to datetotal in the aggregate approximately $6 million. CKI intends to appeal theeight adverse decisions. CKI also expects a significant number of plaintiffsto appeal decisions rendered against them, including plaintiffs that wereawarded less than all of the damages they sought.The Korean prosecutors have also undertaken a criminal investigation ofthe local banks, including CKI, based on allegations of fraud in the sale ofthese products. This investigation is ongoing. The local banking regulatoralso undertook an investigation of the local banks regarding the sale of theseproducts. This investigation resulted in disciplinary recommendations by thelocal banking regulator with respect to certain CKI employees, but CKI itselfwas not sanctioned.Tribune Company BankruptcyCertain Citigroup entities have been named as defendants in adversaryproceedings related to the Chapter 11 cases of Tribune Company (Tribune)pending in the U.S. Bankruptcy Court for the District of Delaware. Thecomplaints set forth allegations arising out of the approximate $11 billionleveraged buyout (LBO) of Tribune in 2007. With respect to Citigroup, thecomplaints allege claims relating to Citigroup’s role as lender and advisor toTribune in connection with the LBO and seek to avoid, recover, subordinateor disallow payments on LBO debt, as well as approximately $57 millionin lender and advisory fees received by Citigroup and Related Parties inconnection with the LBO. The complaints also assert claims of aiding andabetting breaches of fiduciary duty by Tribune management as well asprofessional malpractice. The complaints have been stayed by court orderpending a confirmation hearing on competing plans of reorganization. Ifconfirmed, the plan proposed by the Debtors and others, and supported byCitigroup, would settle all claims relating to Citigroup’s role as lender. OnFebruary 11, 2011, Tribune and its debtor subsidiaries announced that mostclasses of voting creditors overwhelmingly approved the Debtors’ plan. TheBankruptcy Court has scheduled a confirmation hearing for March 7, 2011.Additional information relating to these actions is publicly available in courtfilings under the docket number 08-13141 (Bankr. D. Del.) (Carey, J.).Interchange Fees LitigationBeginning in 2005, several putative class actions were filed against Citigroupand Related Parties, together with Visa, MasterCard and other banksand their affiliates, in various federal district courts. These actions wereconsolidated with other related cases in the Eastern District of New York andcaptioned IN RE PAYMENT CARD INTERCHANGE FEE AND MERCHANTDISCOUNT ANTITRUST LITIGATION. The plaintiffs in the consolidated classaction are merchants that accept Visa- and MasterCard-branded paymentcards, as well as membership associations that claim to represent certaingroups of merchants. The pending complaint alleges, among other things,that defendants have engaged in conspiracies to set the price of interchangeand merchant discount fees on credit and debit card transactions in violationof Section 1 of the Sherman Act. The complaint also alleges additionalSherman Act and California law violations, including alleged unlawfulmaintenance of monopoly power and alleged unlawful contracts in restraintof trade pertaining to various Visa and MasterCard rules governing merchant287