Citigroup and its former Smith Barney brokerage unit, together with two executives, saw nearly all claims thrown out in a lawsuit that accused them of shortchanging mutual fund investors out of more than $100 million in fee discounts.
Reuters reported Wednesday that U.S. District Judge William Pauley dismissed all claims against Citigroup and the former Smith Barney Fund Management, as well as those against Thomas Jones, formerly CEO of Citigroup Asset Management. Pauley also dismissed some of the claims against Lewis Daidone, a former Smith Barney senior vice president.
At issue were fees charged by Citicorp Trust Bank, an in-house transfer agent created by Citigroup, which was supposed to be able to charge lower mutual fund fees than First Data Corp. The latter’s contract was expiring, and shareholders sued, saying that Citicorp Trust Bank, instead of lowering fees, continued to charge more in what they said was a “kickback scheme” that funneled to the bank more than $100 million in profits that should instead have been passed on to fund shareholders.
Citing the passage of time as one factor in his decision, Pauley wrote, “In the Eclogues, Virgil observed that ‘time bears away all things, even our minds.’ Virgil’s maxim applies to legal theories as well.” Last September Pauley delayed the case, saying there were “epic failures” on both sides, by removing the lead plaintiff after he learned that it never owned shares that were part of the case.