Sept 19 An arbitration panel has denied fraud claims against Citigroup Global Markets, Morgan Stanley & Co and others brought by Detroit's Police and Fire Retirement System, which was seeking $39.9 million in damages.
The three-member panel of the Financial Industry Regulatory Authority, an independent regulator of U.S. securities firms, denied and dismissed on Wednesday all of the claims the pension fund filed against the banks in May 2010.
The fund accused the banks of fraud and breaching contracts and their fiduciary duty over their recommendations to invest in various collateralized debt obligation funds. The pension fund, which reported net assets of $2.9 billion at the end of fiscal 2012, sought $39.9 million in actual and compensatory damages.
Also named in the complaint were GSC Partners CDO Investors; GSC CDO Fund, Ltd.; GSCP L.P.; and two employees of Smith Barney and Morgan Stanley, who the arbitration panel determined did nothing wrong in their dealings with the pension fund.
Officials at the pension fund were not immediately available for comment.
The retirement fund for Detroit's police and fire workers, along with the city's General Retirement System are at the center of a battle in U.S. Bankruptcy Court over whether pension benefits can be reduced to help the cash-strapped city.
Detroit's state-appointed emergency manager filed what would be the biggest municipal bankruptcy in U.S. history on July 18. Fearing that retirement benefits would be cut in violation of the Michigan Constitution, the pension funds filed challenges to the filing. The federal judge overseeing the case is holding hearings on whether Detroit can legally seek protection from creditors and if the city meets insolvency and good-faith negotiations tests.