Citigroup Global Markets, Inc. Found Liable For Sale of Mat Five To Investors
BEVERLY HILLS, Calif., May 12, 2010 – A Los Angeles based Financial Industry Regulatory Authority (FINRA) arbitration panel awarded more than $1.7 million to three clients of Aidikoff, Uhl & Bakhtiari and Maddox, Hargett and Caruso, P.C. in connection with their purchases of Mat Five.
Mat Five was a leveraged municipal arbitrage hedge fund launched by Citigroup Global Markets, Inc. and sold through Smith Barney, part of Citigroup’s (NYSE: C – News) Global Wealth Management Group in February 2007. Mat Five was marketed only to high net worth clients of the firm. The fund imploded one year later causing catastrophic losses to investors.
Despite widespread evidence of material omissions, Citigroup elected to employ the “blame the customer” defense which the panel rejected. When confronted with evidence that Citigroup misrepresented Mat’s risk level to their brokers who passed the misleading information on to their clients, a high ranking Citigroup official said that it would be “unwise” for customers of the firm to rely on what their broker told them about a recommended investment.
“This award represents a return of our clients’ losses plus interest and is the first significant investor win in a Mat case,” according to Philip M. Aidikoff.
“The fund was represented by Citigroup to its brokers as a fixed income alternative with the volatility of the Lehman Brothers Aggregate Bond Index and LIBOR,” stated Ryan K. Bakhtiari who added “In truth, evidence at the hearing demonstrated that Mat Five was a risky investment which subjected investors to a 100 percent or more loss of principal.”
“Despite the representations to our clients, the evidence established that Mat Five was 2.5 times more volatile than the S&P 500 and 7.8 times more volatile than a traditional portfolio of municipal bonds. This was not what our clients were told by their brokers,” according to Steven B. Caruso.
The FINRA arbitrators also assessed the entire cost of the hearing against Citigroup Global Markets, Inc.
The law firms continue to investigate and pursue FINRA arbitrations on behalf of investors who suffered losses in fixed income alternatives, including Mat/ASTA.