GLOBAL - Norges Bank has filed a $735m (€562m) lawsuit against Citigroup, claiming it bought shares in the group at inflated prices between 2007 and the beginning of 2009.
The Norwegian national bank - whose asset manager, Norges Bank Investment Management, looks after the NOK2.8trn (€352bn) Government Pension Fund Global - claims Citigroup failed to fully disclose its exposure to the subprime mortgage market.
Norges Bank alleges that, in mid-2007, at a time when many banks were starting to feel the effects of the market downturn, Citi "touted its ability to withstand" the slump, failing to disclose that it had been unable to offload a number of its collateralised debt obligations (CDOs).
Norges claims that while the group disclosed $11.4bn in CDOs on its third-quarter 2007 balance sheet, it "continued to conceal" an additional $54bn of debt.
"In total," the company argues in its filing, "Citi eventually disclosed over $65bn in CDO exposure.
"However, even when Citi disclosed its CDO exposure, it continued to misrepresent the quality and value of its remaining holdings.
"In constructing its valuation model, Citi disregarded market information, industry knowledge and even its own internal analysis as to how these assets should be valued."
The filing points out that, between October 2007 and January last year, Citi's shares fell by 93%, from $47.72 to $3.50.
The aim of the suit, Norges says, is to recover the losses it incurred as a result of its purchases of Citi securities from 19 January 2007 to 15 January 2009.
Norges says it held more than 50m Citigroup shares and was therefore seeking damages in excess of $735m.
A spokeswoman at Norges Bank would not comment on individual aspects of the lawsuit, but confirmed an individual claim had been filed with the central court of New York.
She added that Norges' complaint had "to a large extent" tracked another complaint filed in a pending class-action lawsuit against the US banking group, adding: "We have decided that it better serves our purposes to pursue our own direct action."
A spokesman for Citigroup said: "We believe the suit has no merit and will defend ourselves vigorously."