(Bloomberg) -- Citigroup Inc. sued Wells Fargo & Co. and its takeover target Wachovia Corp. for $60 billion, claiming their agreement violates its rights to buy a portion of the Charlotte, North Carolina-based lender under a previous deal.
Citigroup is seeking more than $20 billion in compensatory damages and $40 billion in punitive damages from the banks, their officers and directors, according to a complaint filed today in New York State Supreme Court in Manhattan.
``The Citi/Wachovia transaction would have been signed and announced on Friday, October 3rd if it had not been subverted by the unlawful conduct of Wachovia, Wells Fargo, and their officers and directors and outside advisers,'' Citigroup said in a statement.
Citigroup seeks to complete its purchase as part of a rebuilding effort following $61 billion in losses tied to the mortgage-market collapse. The bank wants to buy parts of Wachovia for about $2.16 billion. San Francisco-based Wells Fargo's $15 billion bid is for the whole company. Wachovia said the Wells Fargo offer is a better deal for investors, employees and taxpayers because, unlike Citigroup, it doesn't rely on U.S. government assistance.
Wachovia spokeswoman Christy Phillips-Brown and Wells Fargo spokeswoman Melissa Murray declined to comment, saying the banks hadn't seen the complaint.
State Law
The suit, which focuses on state law, alleges breach of contract and tortuous interference, where a third party interferes with an agreement between two others. Citigroup also seeks an order barring Wachovia and Wells Fargo from continuing their merger talks and an order forcing Wachovia to negotiate with it ``in good faith.''
A separate lawsuit is pending between Citigroup and Wachovia across the street in Manhattan federal court. In that case, Wachovia said that the $700 billion federal bailout law for the banking industry signed into law last week includes language that permitted Wells Fargo to top Citigroup's offer, a contention disputed by Citigroup's lawyers. That case was assigned today to U.S. District Judge Lewis Kaplan.
Gregory Joseph, an attorney for Citigroup, told New York State Supreme Court Justice James McGuire of the state appeals court yesterday that his client had sought to file a lawsuit against Wachovia on Oct. 3.
``On Friday we were ready to file and we were told by federal regulators that we should not,'' Joseph said. By Oct. 4, Citigroup decided to file suit and went searching for an available state court judge who handles business cases. They eventually located Justice Charles Ramos at his home in Cornwall, Connecticut.
Extended Right
Ramos on Oct. 4 extended Citigroup's sole right to negotiate with Wachovia after lawyers for Citigroup sought an emergency extension of an ``exclusivity agreement.''
Yesterday, McGuire reversed that ruling. Ramos has scheduled an Oct. 10 hearing in the case.
According to Citigroup's state court complaint, Wells Fargo's proposed transaction triggers severance payments that may enable Wachovia Chief Executive Officer Robert Steel and other senior executives to receive a combined $225 million.
The consummation of Citigroup's offer wouldn't prompt similar agreements because the New York-based bank was buying Wachovia's banking operations and not the entire company, according to Citigroup.
Citigroup dropped $1.57 to $16.78 at 1:25 p.m. in New York Stock Exchange composite trading. Wachovia fell 47 cents to $5.74 and Wells Fargo fell $1.68 to $32.88.
The case is Citigroup Inc. v. Wachovia Corp., 08-602872, New York State Supreme Court for New York County (Manhattan).
1 comment:
I have always avoided banking stocks.
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