Citi Loses Suit To Recoup $500 Million In Mistakenly Transferred Funds

Citigroup’s erroneous sending of a half-billion dollars to Revlon lenders can’t be recouped, U.S. District Judge Jesse Furman in New York ruled on Tuesday (Feb. 16), Bloomberg reported.

The mistake pushed Citi to reassess its internal controls while also responding to lawmakers. The judge ruled that the lender’s asset managers — including Brigade Capital Management, HPS Investment, and Symphony Asset Management — don’t have to return more than $500 million that Citibank said it mistakenly transferred in August while trying to make an interest payment.

“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 $1 billion would have been borderline irrational,” Furman said.

Citigroup is working on updating its underlying controls after facing a $400 million fine last year. The company is also bringing in a new chief executive officer, Jane Fraser, set to begin on March 1.

“We strongly disagree with this decision and intend to appeal,” said Citigroup spokesperson Danielle Romero-Apsilos. “We believe we are entitled to the funds and will continue to pursue a complete recovery of them.”

The decision is a plus to creditors, which have been in the crosshairs with Revlon’s billionaire investor Ronald Perelman. They argued that the Aug. 11 payment abolished Revlon’s debt to them under a 2016 term loan.

“The transfers matched to the penny the amount of principal and interest outstanding on the loan,” Furman said in his decision, per Bloomberg. “The accompanying notices referred to interest being ‘due,’ and the only way in which that would have been accurate was if Revlon was making a principal prepayment. And it appears that no mistake of the size or nature of Citibank’s had ever happened before.”

In August, Citi maintained that a software error caused a near $1 billion problem. The error was unearthed in a Citigroup division responsible for loans. Prior to the discovery of the mistake, the bank issued payment to Revlon’s lenders on a loan issued in 2016.