More developments this week in the Australian corporate regulator's lawsuit against Citigroup for insider trading and failing to manage the conflicts of interests involving its proprietary trading.
The case revolves around the alleged conflict of interest Citigroup found itself in with the freight company Toll's $A5.5 billion ($US3.9 billion) takeover offer for stevedoring outfit patrick in 2005. Citigroup is Toll's corporate adviser and was also trading in Patrick shares on its own behalf before the bid was announced.
The case is due to start on March 26 and it's expected to run for three weeks.
I have blogged on the case here, here, here and here.
This week at the final directions hearing before the case begins, the Australian Securities and Investments Commission highlighted the conflicting and "significantly different" accounts that senior Citigroup execuctives gave of how their people had managed the alleged conflict of interest. ASIC had picked up the discrepancies when it had called them in for questioning.
For more, check this news report
Still, despite the contradictory evidence, ASIC failed in its attempt to get permission to put the Citigroup executives under the griller in court. Judge Peter Jacobson rejected the application by the Australian Securities & Investments Commission to cross-examine them. So what if ASIC had got contradictory answers when it questioned the executives, said Citigroup. Why is this our problem? Dermot Ryan, a lawyer for Citigroup, told the judge that the executives had already been questioned by the regulator. He said it would be "radical and unprecedented'' for the commission to call witnesses and cross-examine them. In the end, the judge said he didn't see any need to depart from the established rules.
Certainly the evidence of conflicting accounts isn't a great look for Citigroup. But the judge's decision isn't good for ASIC.
Watch this space.
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