Citi in $75 Million Global Crossing Settlement
Citigroup
(C) - Get Report
will pay $75 million to settle claims brought by shareholders of
Global Crossing
(GLBC)
, a onetime Wall Street darling of the telecom sector.
The world's largest financial services firm will pay for the settlement out of an existing legal reserve it set up to resolve a number of outstanding lawsuits and regulatory investigations.
The investors had sued Citigroup because it was the underwriter of several Global Crossing stock offerings. They alleged that Citigroup knew or should have known that Global Crossing allegedly had inflated its revenues. In settling the matter, Citigroup denied "any violation of law," according to a press release.
The amount being paid by Citigroup is small potatoes compared with the massive $2.65 billion settlement it reached last year with shareholders of former telecom giant WorldCom, now called
MCI
(MCIP)
.
Back in the late 1990s, Global Crossing, founded by Gary Winnick, was one the telecom industry's high-flying stocks. But the shares crashed as demand for its fiber-optic network failed to materialize. The debt-laden company filed for bankruptcy in 2002.
In 2003, the company emerged from bankruptcy after erasing $12 billion in debt along with $40 billion in shareholder equity.
Last year Winnick and other former Global Crossing executives agreed to pay $325 million to settle a shareholder suit that alleged the company had misled investors by inflating revenues.