A Colorado federal judge upheld a $54.1 million arbitration award against Citigroup Global Markets, Inc. (Citigroup) issued by a Financial Industry Regulatory Authority (FINRA) arbitration panel in April. In her order, U.S. District Judge Christine Arguello stated that maximum deference is owed to arbitrators because parties have contracted to bring their dispute to binding arbitration.
The FINRA arbitration award ordered Citigroup to pay compensatory damages of $34.1 million, punitive damages of $17 million, legal fees of $3 million and costs of about $80,000 in connection with losses in a series of municipal bond funds Citigroup sold through a group called MAT Finance, LLC. MAT (municipal arbitrage trust) created funds that borrowed at low, short term rates and used the proceeds to invest in longer-term municipal bonds. According to published reports, these investments incurred losses of up to 80% in 2007 and 2008.
The claimants in the FINRA arbitration claimed that Citigroup misrepresented the risks involved in the products.