Citi sued over auction-rate securities
April 17 (Reuters) - A Massachusetts pharmaceutical company filed a lawsuit against Citigroup Inc (C.N) over the sale of auction-rate securities (ARS), court documents show.
In a lawsuit filed with the United States District Court in Massachusetts on Thursday, Braintree Laboratories alleged that Citigroup sold the firm $33.2 million of the securities, even though the market for them had collapsed.
Auction-rate debt has rates that reset in periodic auctions.
Citigroup concealed from regulators and customers its continued sales of such toxic instruments by means of false and misleading descriptions, and also destroyed relevant evidence concerning its wrongdoing," Braintree said in the filing.
Braintree bought the securities between June and August 2008.
A Citigroup spokesman in Asia did not immediately return a Reuters email seeking comment.
The auction-rate market froze early in 2008 in the wake of a credit crunch that destroyed the top ratings of some insurance companies that insured much of the debt.
Citigroup, last year, agreed to return to individual investors, small businesses and charities $7.5 billion of their money from ARS and to use its "best efforts" to liquidate by the end of 2009 about $12 billion worth of the securities it sold to retirement plans and other institutional investors. (Reporting by Ajay Kamalakaran in Bangalore; editing by Simon Jessop and Derek Caney)
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