Citigroup Targeted by Lawsuit from Florida City Pension in Revlon Mess

The bank’s $900 million mistaken payments to Revlon creditors have harmed its stock, which the retirement system and others are invested in, suit says.

Investors, led by a Florida municipal union’s pension plan, are suing Citigroup for fraudulent accounting due to the bank’s imbroglio over paying Revlon creditors.

A class action securities lawsuit, filed against Citi on behalf of Florida-based City of Sunrise Firefighters’ Pension Fund, alleges the bank misled it and other Citi stockholders investors regarding its internal accounting controls, risk management, and regulatory compliance.

At the heart of the litigation is Citi’s mistaken overpayment of $900 million to creditors of Revlon, the beauty company, which is struggling under a large debt load, plus declining business due to changing consumer tastes and the pandemic. The bank is acting as an agent to pay the creditors and thus fend off a bankruptcy filing.

The suit was filed on behalf of investors who purchased Citi common stock between February 2017 and October 2020. It was filed in the US District Court for the Southern District of New York by law firm Bernstein Litowitz Berger & Grossmann.

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In August, Citi sued managers HPS Investment Partners and Symphony Asset Management, which are Revlon creditors, after accidentally sending HPS money that it failed to return.

Representatives for Citigroup, HPS, and Symphony’s parent company Nuveen declined to comment.

The mess might have had reverberations in Citi’s C-suite. In September, the bank disclosed that CEO Michael Corbat would be retiring in February 2021, although he was expected by investors to retire the following year in 2022.

The same month, an internal memo was made public from Citi’s CEO, saying the company held a “lax” attitude on internal controls and regulatory compliance, the suit found.

On Oct. 13, Citi disclosed that its expenses jumped to $11 billion, a 5% increase in the third quarter because of regulatory fines and other costs due to revamping internal controls. The stock price for Citi dropped “precipitously,” the suit said. Stock price for Citigroup dropped 6% to roughly $43 during trading on Oct. 13.

Any members who were affected can serve as lead plaintiffs in the class action lawsuit if they file a motion by December 29, 2020, the suit said.

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Tags: Citibank, Citigroup, Citigroup Pty Ltd, City of Sunrise Firefighters’ Pension Fund, price, share price, Stock

KEY TAKEAWAYS

Low-cost de-carbonization technologies continue to improve, reducing the lower half of the cost curve by 20% from last year.
Clean hydrogen emerges as the breakthrough technology.
Financial innovation and a lower cost of capital for low-carbon activities have driven one-third of renewables’ cost deflation since 2011.

Thanks to advances in technology and financial innovation, as well as increased shareholder engagement, the goal of achieving net zero carbon is becoming increasingly more affordable, according to research from Goldman Sachs.

Climate change is altering the energy industry through technological innovation and capital markets pressure, and Goldman Sachs has constructed a “carbon abatement cost curve” for conservation technologies that are currently available in industries such as power generation, industry, transport, buildings, and agriculture. In its annual “Carbonomics” report, the firm said this cost curve shows the reduction potential for manmade greenhouse gas emissions through more than 100 different applications of conservation technologies.

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Since last year alone, when it put out its inaugural “Carbonomics” report, Goldman Sachs estimates that the annual cost of 50% de-carbonization has been reduced by approximately 20% from $1.2 trillion per year to $1 trillion per year based on the latest updated 2020 cost curve. The report said that two-thirds of the cost deflation was driven by improved manufacturing efficiency through global scale, and one-third was driven by lower cost of capital.

“As we move higher on the abatement cost curve towards 70% de-carbonization, we encounter the harder-to-abate emissions in need of material technological innovation, and the cost curve takes on an exponential shape,” the report said. “This part of the cost curve has seen the greatest improvement year on year, mainly thanks to renewed policy support for clean hydrogen.”

This has resulted in an approximate 30% global annual cost reduction to $2 trillion from $2.9 trillion, according to the report, which estimates that some 35% of the de-carbonization of global manmade greenhouse gas emissions relies on access to clean power generation, with clean hydrogen being the second most scalable technology.

“Clean hydrogen addresses the tougher to de-carbonize emissions (industry, heating, heavy transport) that make up 20% of global GHG [greenhouse gas] emissions,” according to the report.

Goldman Sachs said the 2020 cost curve results in a maximum 85% de-carbonization through conservation compared with 75% de-carbonization achieved at the same cost based on the 2019 cost curve, which contributes an additional 10% of de-carbonization potential.

“The ongoing downward trajectory of the cost of capital has been a key driver of the overall affordability and competitiveness of clean energy,” said the report. “In contrast, financial conditions keep tightening for long-term hydrocarbon developments, creating higher barriers to entry, lower activity, and ultimately lower oil and gas supply in our view.”

Goldman Sachs’ research also found that shareholder engagement has been a major contributor to the declining cost of capital for low-carbon projects.

“With global GHG emissions on a persistent upward trajectory over the past decade, investors have emerged with a leading role in driving the climate change debate,” said the report, “pushing corporate managements towards incorporating climate change into their business plans and strategies.”

According to Goldman Sachs, the number of climate-related shareholder proposals has nearly doubled in nine years, while the percentage of investors voting in favor of those proposals has tripled over the same period.

“So far, 2020 has been, despite the outbreak of COVID-19, another year of strong shareholder engagement on climate change,” said the report.

However, it added that investor pressure is not uniformly distributed across sectors and shows a clear bias toward energy producers over energy consumers. The report said that data since 2014 shows 50% of proposals target energy producers such as oil and gas companies, utilities, and coal companies, while only 30% of the proposals target the sectors that account for most of the final energy consumption.