Citibank Loses Bid to Recall $500 Million in Mistaken Repayment of Revlon Loan
It was one of the worst Wall Street accidents in years: Citigroup accidentally pledged $ 900 million last year to a group of lenders locked in a dispute with beauty company Revlon.
On Tuesday, a federal judge ruled that recipients are not required to return the cash.
Citi intended to make a small interest payment on Revlon’s behalf, but instead paid off the loan in full. And some lenders – who had sued Revlon and Citi to repay the loan – refused to return nearly $ 500 million.
In error it is usually necessary to return it to the recipient of the wired cache. But in this case, creditors had grounds to deliberate the payment, Judge Jesse M. of the US District Court in Manhattan. Furman. Written under his rule.
“To believe that Citibank, one of the world’s most sophisticated financial institutions, had made a mistake that had never happened before, to the tune of nearly $ 1 billion, the frontier would be irrational,” he wrote.
Citibank said it strongly disagreed with the decision and intended to appeal.
“We believe that we are entitled to the funds and one of them will continue to pursue the full recovery,” said Daniel Romero-Upsilos, a City spokesman.
Robert Loigman, a lawyer who represents the creditors, said his clients were “extremely pleased with Judge Furman’s thoughtful and detailed decision.”
Judge Furman, accepting that the appeal was likely, placed a temporary restraining order restraining 10 investment firms from using the funds.
The ruling described how Citi’s “six eyes” protect security, requiring three people to approve the transaction before executing it, after a contractor checks the wrong box on a digital payment form broken Gone.
Some recipients viewed the payment as a pleasant surprise. One of Revlon’s creditors, a portfolio manager at Allstate, wrote in an internal message, “Not sure if this is in error, very unlikely.”
Citi detected the error within a day and sent notices to retrieve the cash – which came from its own fund, not Revlon’s – but some recipients, including Allstate, Balked.
Judge Furman said his rule could have been different if he had been able to “write on a blank slate”, but that precedent forced him to find favor with creditors.
“However, the fault that led to the case may be the cosmic Black Swan event, and the risk of a recurrence may therefore be small, the banking industry would – and would be wise to eliminate the risk -” he wrote.