ASTA/MAT Lawsuits, Taxpayer Bailouts Aside, Citigroup Plans Big Pay Raises

Despite the fact it has numerous lawsuits and arbitration claims pending over a group of failed hedge funds known as ASTA/MAT - not to mention having received some $45 billion of federal govern ment bailout money - Citigroup plans to raise the base salaries of its investment bankers and traders by as much as 50%. 

As reported June 24 by Bloomberg, Citigroup isn’t the only financial services firm instituting big salary increases for some of their top executives. Morgan Stanley and UBS plan to do so, as well. 

Over the past year, Citigroup been rocked by investor complaints and lawsuits connected to the failure of ASTA/MAT, a group of six hedge funds sold under the brand names of ASTA and MAT. Investors contend Citigroup misrepresented the funds as safe, conservative investments, a desirable alternative to traditional bond funds that would produce tax-advantages and reliable cash flows. 

Millions of dollars in losses later, investors learned that Citigroup had employed a highly risky investing strategy known as municipal bond arbitrage, which entailed borrowing approximately $8 for every $1 raised. When the credit and bond markets began to experience trouble in the summer of 2007, ASTA/MAT started to lose value. Ultimately, the funds plummeted by some 90%.

Citigroup followed up the financial problems of ASTA/MAT by offering to compensate investors for their losses. The plan, however, translated into refunding only 45% to 55% of the value in their portfolios. To top it off, the deal required investors to forego future litigation against Citigroup.

Meanwhile, the New York-based bank is announcing pay hikes for certain employees.

“They just don’t get it,” said Senate Banking Committee Chairman Christopher Dodd, D-Conn., of Citigroup. 

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

This entry was posted on Friday, June 26th, 2009 at 7:33 amand is filed under Citigroup, Citigroup ASTA Fund MAT fund. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.