A United States federal judge ruled that the bank is not entitled to the $893m it wired to Revlon’s lenders by mistake.
A United States federal judge on Tuesday said banking giant Citigroup Inc is not entitled to recoup hundreds of millions of dollars of its own money that it mistakenly wired to the lenders of a cosmetics company.
US District Judge Jesse Furman in Manhattan said the August 11, 2020 wire transfers to lenders of Revlon Inc at issue were “final and complete transactions, not subject to revocation”, calling the mistake “a banking error of perhaps unprecedented nature and magnitude”.
A spokeswoman for Citigroup said the bank strongly disagrees with this decision and intends to appeal.
“We believe we are entitled to the funds and will continue to pursue a complete recovery of them,” the bank said.
The case stemmed from an incident where Citigroup, acting as Revlon’s loan agent, wired $893m to Revlon’s lenders, appearing to pay off a loan not due until 2023.
Citigroup had intended to send a $7.8m interest payment, and blamed human error for the gaffe.
Some lenders returned money they were sent, but 10 asset managers including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management refused, prompting Citigroup’s lawsuit to recoup the estimated $501m they received.
Citigroup had argued that the lenders should return the money because they knew or should have known the bank made a mistake, and that Revlon could not afford the payment.
But in a 101-page decision, following a six-day trial in December, Furman noted that the transfers matched “to the penny” what the lenders were owed, and said it appeared there had never been a mistake of this size before.
“The non-returning lenders believed, and were justified in believing, that the payments were intentional,” Furman wrote. “To believe otherwise – to believe that Citibank, one of the most sophisticated financial institutions in the world, had made a mistake that had never happened before, to the tune of nearly $1bn – would have been borderline irrational.”
Lawyers for both parties did not immediately respond to requests for comment.
Administrative agents typically distribute interest payments and perform back-office services for clients such as Revlon.
Industry groups have said a ruling against Citigroup could expose banks to excessive liability risks.
The post 2021-02-16 19:46:05 | $900m gaffe: US judge says Citigroup can’t recoup Revlon payout | Banks News
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