BEVERLY HILLS, Calif., Nov. 21, 2011 (GLOBE NEWSWIRE) -- A Newark, New Jersey based Financial Industry Regulatory Authority (FINRA) arbitration panel awarded more than $750,000 to a client of Aidikoff, Uhl & Bakhtiari and Maddox, Hargett & Caruso, P.C. This award included compensatory damages, interest and an assessment of the entire cost of the hearing against Citigroup Global Markets, Inc.
The investment complained of was a leveraged municipal arbitrage hedge fund known as Mat/ASTA launched by Citigroup Global Markets, Inc. and sold through both Smith Barney and Citigroup Private Bank, part of Citigroup's (NYSE:C) Global Wealth Management Group. These funds were marketed exclusively to high net worth clients of the firm between 2002 and 2007. They were represented as being Fixed Income Alternatives with a slightly higher return than a portfolio of municipal bonds "with little risk to principal." Instead, the funds imploded in February 2008 causing catastrophic losses to investors.
An investigation of Citigroup's conduct uncovered evidence that brokers at Smith Barney believed that they and their clients had been "duped" and that the blow up was a "disaster because of the lack of proper disclosure" to clients of the firm. A well respected managing director observed that the funds had been mismarketed as "bond alternatives" to the sales force who were in turn "encouraged" to market them the same way to clients.
Months before the collapse, executives at Citigroup's Alternative Investment division asked for a review and questioned whether the fund "remains a viable strategy/fund." Another high ranking executive at Citigroup Alternative Investment observed a "Complete lack of key controls", "non-existent" information technology including a lack of profit and loss reporting and risk reporting and concluded the fund was "Built on duct tape and glue."
"The award represents a return of more than 100% of our clients' losses," stated Philip M. Aidikoff of Aidikoff, Uhl & Bakhtiari. Mr. Aidikoff added "Our firm has now served as lead counsel for 17 households in Mat/ASTA arbitration hearings. Thirteen of the 17 have received awards of 100 percent or more of their losses and each of the 17 families have won a significant award."
"The day to day manager of the fund left, telling a colleague to 'never invest in a hedge fund within a big political organization' that there are 'too many diverge[nt] interests and decisions are made not with the best interests of investors' in mind," said Ryan K. Bakhtiari of Aidikoff, Uhl & Bakhtiari who was co-counsel at the hearing.
"The evidence demonstrated that 3 weeks before the blow up, the portfolio manager admitted that the fund's internal operating guidelines were different from the prospectus and were not disclosed to brokers. He said it was not disclosed because it would be 'discoverable, if you ever get sued,'" according to Steven B. Caruso of Maddox Hargett & Caruso, P.C. who was co-counsel at the hearing. "Even the most sophisticated investors were misled by Citi in the marketing and sale of the Mat/ASTA product," stated Mr. Caruso.
Claimant's expert witness was Dr. Craig McCann of Securities Litigation and Consulting Group based in Fairfax, VA.
Aidikoff, Uhl & Bakhtiari continues to investigate FINRA arbitration claims on behalf of investors who suffered losses in leveraged municipal arbitrage products including ASTA and Mat.
More information is available by contacting an attorney below.