* Woori alleged losses on mortgage-linked CDOs
* Bank of America, RBS also had lawsuits dismissed
By Jonathan Stempel
NEW YORK, March 27 (Reuters) – Citigroup Inc on
Wednesday won the dismissal of a lawsuit by Woori Bank over
losses from mortgage-related investments, the third such defeat
in a U.S. court for a South Korean bank that had been put under
state control following financial crises.
U.S. District Judge Laura Taylor Swain said Woori failed to
prove that Citigroup acted fraudulently in selling it $95
million of collateralized debt obligations backed by residential
mortgage-backed securities.
South Korea’s government owns 57 percent of Woori’s parent,
Woori Finance Holdings Co.
Lawyers for Woori were not immediately available for
comment.
In its May 2012 lawsuit, Woori contended that Citigroup knew
the CDOs were backed by securities that could and did prove
toxic, and which were issued by entities formed by the bank that
had no workers, no operating history, and nominal capitalization
– “essentially mail drops,” as Swain put it.
But Swain said Woori’s complaint made only a few specific
connections between its CDO purchases and any alleged improper
behavior by the third-largest U.S. bank.
“Woori relies on vague and conclusory allegations” regarding
Citigroup’s alleged knowledge of inadequate underwriting
standards, improper treatment of poorly performing loans, and
alleged pressure on credit rating agencies to inflate ratings.
“These allegations are insufficient to meet Woori’s fraud
pleading burden,” she wrote. Swain also dismissed a claim of
negligent misrepresentation.
The dismissal was without prejudice, and Swain gave Woori 30
days to file an amended complaint.
Created in the aftermath of the 1997 Asian financial crisis,
Woori is the South Korean financial sector’s biggest victim of
the U.S. subprime mortgage crisis, having written off much of a
roughly $1.5 billion stake in credit default swaps and CDOs.
In December, a different Manhattan federal judge dismissed
Woori’s lawsuit against Royal Bank of Scotland Group Plc
over losses on $80 million of debt securities.
Then in February, a third Manhattan federal judge dismissed
Woori’s case against Bank of America Corp’s Merrill
Lynch unit over losses on $143 million of debt
securities.
The case is Woori Bank v. Citigroup Inc, U.S. District
Court, Southern District of New York, No. 12-03868.
