May 18, 2012 / 11:14 PM / 6 years ago

Solow lawsuit over Citigroup disclosures dismissed

(Reuters) - Citigroup Inc (C.N) and its Chief Executive Vikram Pandit on Friday won a dismissal of New York real estate developer Sheldon Solow’s lawsuit accusing them of securities fraud for hiding the bank’s risks during the 2008 financial crisis.

Citigroup CEO Vikram Pandit (C), EIU Director of Global Forecasting Leo Abruzzese (L) and New York City Mayor Michael Bloomberg announce that New York City has been named The World's Most Competitive City by the Economist Intelligence Unit in New York March 12, 2012. REUTERS/Brendan McDermid

U.S. District Judge Robert Sweet in Manhattan said Solow failed to show that the defendants had materially misled him about Citigroup’s liquidity and capitalization, or that his stock losses were caused when the bank’s risks were realized.

Sweet had in November dismissed an earlier version of Solow’s complaint, but gave the plaintiff a chance to replead. Friday’s dismissal is “with prejudice”, meaning that Solow cannot bring the case again.

Ira Lee Sorkin, a partner at Lowenstein Sandler representing Solow, did not immediately respond to a request for comment, including over whether his client plans an appeal. Citigroup did not immediately respond to a similar request.

The lawsuit is separate from nationwide litigation by Citigroup stock and bond investors over the bank’s disclosures about its exposure to toxic mortgage debt. That litigation is overseen by Sweet’s colleague, U.S. District Judge Sidney Stein.

Solow claimed the New York-based bank was responsible for his losing 87 percent of a $510,000 investment in 40,000 Citigroup shares that he bought in September and November 2008. He sold the shares in March 2009.

The developer contended that Citigroup overstated its financial health in late 2008 and early 2009, even trying to buy parts of Wachovia Corp before that struggling lender agreed to a takeover by Wells Fargo & Co (WFC.N).

He also said Citigroup even touted its strong capital levels and liquidity while quietly scrambling to obtain a federal bailout that included $20 billion of new capital.

Sweet, however, said Solow failed to link Citigroup’s alleged concealments to the decline in its stock price, which fell briefly below $1.

“Citigroup’s liquidity crisis can be attributed to a lack of confidence in the firm rather than the materialization of a risk defendants concealed,” he wrote.

The case is Solow v. Citigroup Inc et al, U.S. District Court, Southern District of New York, No. 10-02927.

Reporting By Jonathan Stempel in New York; editing by Carol Bishopric

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