NYC, Citigroup Settle Their Sec Lending Differences

July 6, 2004 ( - Citigroup Inc. has agreed to pay New York City up to $45 million to compensate for losses sustained by the city's five pension funds in National Century Financial Enterprises.

Per terms of the agreement announced jointly by the city and the investment bank, Citigroup will make an immediate upfront payment of $15 million to the funds.   Additional payments are contingent on what the funds can recover from other parties involved.

“The funds are aggressively pursuing recovery from National Century’s officers and directors as well as Bank One Corp., Credit Suisse Group, J.P. Morgan, Fitch Rating agency and others in federal court in Ohio for their roles in National Century’s collapse,” the joint news release said.

The settlement stems from an $80 million loss the city’s pension funds sustained through investments in thecity’s collateral reinvestment programinto nowdefunct National Century.   While New York’s five pension funds were not alone in their loss – various Arizona city and county agencies, for example, investing in that state’s Local Government Investment Pool, reportedly lost in excess of $131 million – unique in this case was the question of where did responsibility lie, specifically, whether or not Citigroup made the investment within the guidelines of the city’s sec lending program (See  Controversy Swirls Around NYC Pension Fund ).