Norway Towns Sue Citi Over Losses
Seven Norwegian municipalities are suing Citigroup Inc after losing millions of US dollars on investments. The towns are seeking $200 million in damages together with Norwegian firm Terra Securites. Terra bought the structured notes from Citigroup in May and June 2007, and was bankrupt by May 2008. The towns took out a loan from the bank DnB NORD and bought notes for $176 million.
After the losses emerged, legal authorities deemed the notes to be against the local Municipal Government Act and so the municipalities claimed that, since it was against the law for them to buy the notes, the loan agreements with DnB NOR were invalid.
The municipalities and Norwegian firm Terra Securities claim Citigroup misrepresented certain structured notes as a conservative investment, according to a filing made on Monday in a New York court.
The case has lead to Norway changing its policies regarding sales of securities to nonprofessional investors.