|TAP Special| Citibank has lost a key decision in its defense of a lawsuit in Abu Dhabi accusing the bank of self-dealing, defrauding investors, and attempting to cover-up investor losses.
The Abu Dhabi Commercial Court of First Instance on April 14, 2015 determined the lawsuit should proceed and ordered the appointment of a Committee of Experts to review evidence and determine Citibank’s culpability.
The Court’s decision is a critical and important step in the plaintiff’s attempt to ensure that Citibank will be held responsible for defrauding its investors, and the attorneys representing the plaintiff are looking forward to presenting the evidence to the Committee of Experts.
Investor Dr. Sami Abbas Hussein Ali sued Citibank and related entities in November 2014. The lawsuit contends Citibank International PLC, Citi Private Bank, and Citi Private Bank – Abu Dhabi hid losses from investors in the CReAM (Citi Real Estate Asset Management) Fund, some of whom unknowingly lost their entire investment for more than three years before sending a one-page letter that stated that previous quarterly reports showing value in the investment had been inaccurate as a result of a “Citi Private Bank operational error.”
The lawsuit also maintained that the Citibank purchased two shopping centers in the United Kingdom at questionable values, one of which appears to have been owned by the CReAM Fund’s own manager, without disclosing the “insider” nature of the transaction to investors.
The bank was also accused of failure to obtain required approvals from the UAE Central Bank to solicit investments from investors in that country. Under UAE law, investments marketed to investors in the country without the required approvals are null and void.
Citibank marketed the CReAM Fund to investors in the GCC countries of the Middle East in 2004 as a medium risk investment projected to yield annual revenues at a rate of 4 percent. From 2004 to 2006, the CReAM Fund, which was managed by David Lockhart of the Halladale Group Plc, invested in 12 shopping centers in the United Kingdom.
However, unknown to investors, Lockhart’s employer, Halladale, appears to have owned one of the shopping centers, which was sold to the CReAM Fund at questionable values. All of the shopping centers eventually liquidated, costing investors millions of dollars.
Lockhart, through a new entity known as New River, in 2008 purchased the assets of CReAM Fund at distressed prices. Again, none of the proceeds went to the original investors.
“Citibank, Halladale Company and Mr. Lockhart achieved huge profits…at the time the Plaintiff lost all the invested money,” according to the lawsuit.