Updated from 8:01 a.m. EDT

A lawsuit filed by plaintiffs trying to recoup millions of dollars of

WorldCom

losses in court claims the relationship between the company's chief executive and its underwriters was closer than it previously seemed.

The suit claims

Citigroup's

Travelers Insurance unit made a $679 million loan to a private company controlled by former WorldCom CEO Bernard Ebbers,

The Wall Street Journal

reported. Ebbers was already under fire for pocketing millions of dollars in profits from hot initial offerings spun his way by Citigroup after WorldCom paid million in investment banking fees to the bank.

The suit, filed by New York Comptroller Carl McCall, a candidate for governor, implies that analysts at Citigroup's Salomon Smith Barney unit could have been compromised in their analysis of WorldCom for fear of endangering Ebbers' ability to repay the loan. McCall is trustee of the New York State Common Retirement Fund, which is lead plaintiff in a class-action securities suit related to the collapse in WorldCom's stock.

"Based on our investigation to date, this is yet another case of corporate coziness costing investors billions of dollars and raising troubling questions about the integrity of the information investors receive," McCall wrote.

WorldCom disclosed a massive accounting fraud over the summer and filed for chapter 11 bankruptcy in July.

Citigroup, in a prepared statement, disputed some of the allegations in the lawsuit and said the allegations of any impropriety on its part "are just plain wrong." The bank said the loans to Joshua Timberland, an Ebbers controlled timber-related company, totaled $499 million, not the $697 million that's alleged in the lawsuit.

And Citi said three other "major insurance companies" were involved in providing the financing along with Travelers. The bank said the portion of the loan financed by Travelers totaled $134 million, of which $52 million was arranged by

Travelers Property Casualty

, a business division Citi spun-off earlier this year.