Citigroup Inc.

conduct (including rules allegedly affecting merchants’ ability, at thepoint of sale, to surcharge payment card transactions or steer customersto particular payment cards). In addition, supplemental complaints filedagainst defendants in the class action allege that Visa’s and MasterCard’srespective initial public offerings were anticompetitive and violated Section 7of the Clayton Act, and that MasterCard’s initial public offering constituted afraudulent conveyance.Plaintiffs seek injunctive relief as well as joint and several liability fortreble their damages, including all interchange fees paid to all Visa andMasterCard members with respect to Visa and MasterCard transactions inthe U.S. since at least January 1, 2004. Certain publicly available documentsestimate that Visa- and MasterCard-branded cards generated approximately$40 billion in interchange fees industry-wide in 2009. Defendants disputethat the manner in which interchange and merchant discount fees are set,or the rules governing merchant conduct, are anticompetitive. Fact andexpert discovery has closed. Defendants’ motions to dismiss the pendingclass action complaint and the supplemental complaints are pending. Alsopending are plaintiffs’ motion to certify nationwide classes consisting of allU.S. merchants that accept Visa- and MasterCard-branded payment cards andmotions by both plaintiffs and defendants for summary judgment. Additionalinformation relating to these consolidated actions is publicly available incourt filings under the docket number MDL 05-1720 (E.D.N.Y.) (Gleeson, J.).Parmalat Litigation and Other MattersOn July 29, 2004, Dr. Enrico Bondi, the Extraordinary Commissionerappointed under Italian law to oversee the administration of variousParmalat companies, filed a complaint in New Jersey state court againstCitigroup and Related Parties alleging that the defendants “facilitated” anumber of frauds by Parmalat insiders. On October 20, 2008, following trial,a jury rendered a verdict in Citigroup’s favor and in favor of Citibank onthree counterclaims. The court entered judgment for Citibank in the amountof $431 million on the counterclaims, which is accruing interest. Plaintiff’sappeal from the court’s final judgment is pending. In addition, prosecutorsin Parma and Milan, Italy, have commenced criminal proceedings againstcertain current and former Citigroup employees (along with numerousother investment banks and certain of their current and former employees,as well as former Parmalat officers and accountants). In the event of anadverse judgment against the individuals in question, it is possible that theauthorities could seek administrative remedies against Citigroup. Milanprosecutors have requested disgorgement of 70 million Euro and a fine of900,000 Euro. Additionally, Dr. Bondi has purported to file a civil complaintagainst Citigroup in the context of the Parma criminal proceedings, seeking14 billion Euro in damages. In January 2011, a civil complaint was filedby certain institutional investors in Parmalat securities seeking damagesof approximately 130 million Euro against Citigroup and certain otherfinancial institutions.Research Analyst LitigationIn March 2004, a putative research-related customer class action allegingvarious state law claims arising out of the issuance of allegedly misleadingresearch analyst reports concerning numerous issuers was filed againstcertain Citigroup entities in Illinois state court. Citigroup’s motion to dismissthe complaint is pending.Companhia Industrial de Instrumentos de PrecisãoLitigationA commercial customer, Companhia Industrial de Instrumentos de Precisão(CIIP), filed a lawsuit against Citibank, N.A., Brazil branch (Citi Brazil), in1992, alleging damages arising from an unsuccessful attempt by Citi Brazilin 1975 to declare CIIP bankrupt after CIIP defaulted on a loan owed toCiti Brazil. The trial court ruled in favor of CIIP and awarded damages thatCitigroup currently estimates as approximately $330 million after takinginto account interest, currency adjustments, and current exchange rates.Citi Brazil lost its appeal but filed a special appeal to the Superior Tribunalof Justice (STJ), the highest appellate court for federal law in Brazil. The4th Section of the STJ ruled 3-2 in favor of Citi in November 2008. CIIPappealed the decision to the Special Court of the STJ on procedural grounds.In December 2009, the Special Court of the STJ decided 9-0 in favor of CIIPon the procedural issue, overturning the 3-2 merits decision in favor of Citi.Citi Brazil filed a motion for clarification with the Special Court of the STJ.A decision on that motion is expected in the first or second quarter of 2011.If the Special Court of the STJ were to decide in Citi Brazil’s favor on thepending motion for clarification, the effect would be to reinstate the favorable3-2 decision of the STJ on the merits of the dispute. If the Special Court wereto decide in CIIP’s favor, Citi Brazil expects to file a constitutional action withthe Supreme Court of Brazil seeking to overturn the decision.Allied Irish Bank LitigationIn 2003, Allied Irish Bank (AIB) filed a complaint in the Southern Districtof New York seeking to hold Citibank and Bank of America, former primebrokers for AIB’s subsidiary Allfirst Bank (Allfirst), liable for losses incurredby Allfirst as a result of fraudulent and fictitious foreign currency tradesentered into by one of Allfirst’s traders. AIB seeks compensatory damages ofapproximately $500 million, plus punitive damages, from Citibank and Bankof America collectively. In 2006, the Court granted in part and denied in partdefendants’ motion to dismiss. In 2009, AIB filed an amended complaint,and the parties currently are engaged in discovery.Settlement PaymentsPayments required in settlement agreements described above have beenmade or are covered by existing litigation reserves.* * *Additional matters asserting claims similar to those described above may befiled in the future.288