FINRA Finds Citigroup Global Markets Liable for $54 Million to Investors Over MAT/ASAT Fund, Reports Maddox Hargett & Caruso, P.C.

/ Source: GlobeNewswire

NEW YORK, April 14, 2011 (GLOBE NEWSWIRE) -- A Denver, Colorado, arbitration panel of the Financial Industry Regulatory Authority (FINRA) has awarded $54 million to investors in their case against Citigroup and the MAT and ASTA municipal-bond hedge funds. The plaintiffs were represented by the law firms of Maddox, Hargett & Caruso, P.C. and Aidikoff, Uhl & Bakhtiari.

The award, which is the third-largest arbitration award rendered by FINRA since 1988, includes punitive damages of $17 million and $3 million in attorney fees. In addition, the FINRA panel assessed the entire cost of the arbitration hearing - $33,500 in expert witness fees and $13,168 in court reporter costs - against Citigroup.

Arbitrators in the case did not disclose specifics about the ruling. They ordered Citigroup to pay $21.7 million to patent attorney Gerald Hosier; $8.5 million to Brush Creek Capital LLC (which is owned by Hosier's family); and $3.9 million to venture capitalist Jerry Murdock Jr.

Among the claims cited by plaintiffs in the complaint are breach of fiduciary duty, contract violations, fraud and supervisory failures.

The MAT/ASTA funds have been scrutinized by regulators for more than two years. According to allegations by investors, Citigroup misrepresented MAT/ASTA as safe, conservative and stable fixed-income investments with minimal risks.

Instead, the MAT/ASTA funds plummeted in value in February 2008 amid turmoil in the financial and housing markets, losing from 10 cents to 60 cents on the dollar. At the same time the funds were deteriorating, Citigroup allegedly instructed investors to "stay the course" and suggested MAT/ASTA would rebound once the markets stabilized.

That didn't happen. The MAT/ASTA funds were highly leveraged, borrowing approximately $8 for every $1 raised with the fund's managers investing in some of the most risky and speculative investments possible.

"This award shows that even the most sophisticated investors were misled by Citigroup's marketing of MAT/ASTA," says Steven B. Caruso of Maddox, Hargett & Caruso. "The fact that the FINRA panel also awarded expert witness costs, court reporter costs and all FINRA forum fees against Citigroup is unusual and represents a huge victory for MAT/ASTA investors," he says.

Dr. Craig McCann, founder of Securities Litigation and Consulting Group, served as an expert witness for claimants. According to McCann, MAT/ASTA used short-term borrowings to fund purchases of long-term municipal bonds.

"Citigroup misrepresented the known risks of MAT/ASTA to retail investors. The funds weren't just a little more risky, they were a lot more risky," McCann says.

Additional information is available by contacting Maddox Hargett & Caruso.

CONTACT: Steven B. Caruso, Maddox Hargett & Caruso, P.C. 80 Broad Street, 5th Floor New York, New York 10004 212-837-7908