Citigroup Sued in Abu Dhabi By Investor Over Fund Losses

The bank hid losses in its Citi Real Estate Asset Management Fund for three years before sending a letter that said an “operational error” was to blame for inaccurate values, according to the lawsuit in the Abu Dhabi Commercial Court of First Instance filed by Sami Abbas Hussein Ali.

The lawsuit also alleges that Citigroup acquired two shopping centers in the U.K. at “questionable values,” one of which was owned by the fund’s manager. A public relations company issued a statement on behalf of Ali, detailing the claim.

“At present Citi is not aware of the legal action referred to in the press release,” Citigroup’s Dubai-based spokesman, Karim Seifeddine said in e-mailed comments yesterday. “Citi does not consider there is any merit in the allegations contained in the release and will vigorously defend any proceedings brought against it.”

Abu Dhabi Investment Authority, one of the emirate’s investment funds, lost an appeal last year related to losses on a $7.5 billion investment in Citigroup Inc. The fund, known as ADIA, agreed to buy the equivalent of 4.9 percent of Citigroup in 2007, before share issuances during the financial crisis eroded the value of its holdings. A year later, the bank was bailed out at the cost of $45 billion.

ADIA, which doesn’t give the value of its assets, filed a complaint against Citigroup in 2009, saying it made “fraudulent misrepresentations” about the deal. Last year, a Manhattan federal judge rejected a bid by ADIA to overturn an arbitration panel’s ruling favoring Citigroup in the dispute.

To contact the reporters on this story: Stefania Bianchi in Dubai atsbianchi10@bloomberg.net; Mahmoud Habboush in Abu Dhabi atmhabboush@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.netJohn Viljoen