Citigroup Directors in Dismissal of Shareholder Action Linked to Enron
February 13, 2006
Cleary Gottlieb won in Delaware Chancery Court a motion to dismiss a shareholder action against certain present and former members of Citigroup Inc.’s board of directors. The lawsuits arose out of transactions with Enron and equity reports issued by Jack Grubman of Salomon Smith Barney. Since 2002, several Citigroup shareholders have tried to bring similar actions against Citigroup’s board.
In this latest suit, Cleary asked the Chancery Court of Delaware to dismiss the complaint because the shareholder had failed to make a demand on the Board – a step required under Delaware law before individual shareholders can prosecute claims otherwise belonging to the corporation. The shareholder argued that the complaint should be sustained because a books and records demand had demonstrated that the board did not receive information concerning the challenged conduct. The Vice Chancellor found that the demand was not excused and dismissed the action.