US Courts & Securities Roundup: Arbitration Award in Citi’s Favor is Approved & Investors’ Claims Against An Oppenheimer Private Equity Fund Are Dismissed

District Court Approves Citigroup’s Arbitration Award in Securities Case Against the Abu Dhabi Investment Authority
A judge held that a tribunal did not behave in manifest disregard of the law and that its refusal to provide two documents that the Abu Dhabi Investment Authority had asked for did not make the proceedings “fundamentally unfair.” The court confirmed an award issued in Citigroup Inc.’s (C) favor, which found that the ADIA did not succeed in showing that the arbitration panel’s New York choice of law decision and evidentiary rulings warranted that the award be vacated.

The securities case is Abu Dhabi Investment Authority v. Citigroup Inc.
The disagreement between the two parties comes from a $7.5B investment that ADIA made in Citi in 2007. When differences that could not be reconciled came up, ADIA filed its arbitration claim with the International Centre for Dispute Resolution. It wanted to either have the contract rescinded or be paid over $4B because of alleged common law fraud, securities fraud, breach of contract, and negligent misrepresentation.

However, the arbitration panel ruled in favor of Citi. ADIA then sought to have the award vacated, noting that the tribunal’s decision to invoke New York substantive law to all claims occurred in manifest disregard” of the law while violating the Federal Arbitration Act. The court, however, disagreed. It also said that the tribunal’s refusal to grant access to two document requests was not a violation of the New York Arbitration Convention or the FAA, especially considering that it granted ADIA’s 56 other document requests, which gave the latter access to over 550,000 document pages.

Investors Claims Against An Oppenheimer Private Equity Fund Are Dismissed
The U.S. District Court for the District of Massachusetts has turned down two public retirement funds’ securities claims against an Oppenheimer & Co. Inc. The claimants contend that the Oppenheimer Global Resource Private Equity Fund I LP and related defendants had made false claims to try to get investors. Judge Rya Zobel granted the defendant’s motion to dismiss the Massachusetts securities lawsuit.

The Quincy Retirement Board and the Brockton Retirement Board had substantially invested in the Oppenheimer-administered fund in 2010. Meantime, the fund invested in a fund administered by the Romanian government. The Oppenheimer fund had estimated its investments’ worth via market price but later allegedly changed that up to applying the shares’ par value, which is a lot higher than their market value. As a result, the defendant allegedly about “quadrupled” its reported holdings’ value.

The plaintiffs putative filed a class action securities case in 2012 accusing the fund of “inflating” numbers to draw in investors and get them to think that the fund was making a profit when it was actually at a loss. They contended that the fund’s offering materials made misstatements and violated the ’33 Act. The court, however, said that the act only creates liability for statements that are untrue in a prospectus if public offerings are involved and not private placements.

Related Web Resources:

Abu Dhabi Investment Authority v. Citigroup Inc., Justia Docket

Brockton Retirement Board v. Oppenheimer Global Resource Private Equity Fund I LP, Justia Docket

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Judge that Dismissed Regulators’ Claims Against Morgan Keegan to Rule on ARS Lawsuit Again After His Ruling Was Reversed on Appeal, Institutional Investor Securities Blog, November 27, 2012
The 11th Circuit Revives SEC Fraud Lawsuit Against Morgan Keegan Over Auction-Rate Securities, Institutional Investor Securities Blog, May 8, 2012

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