Citigroup cannot recover more than $500 million it mistakenly paid Revlon lenders in a wire transfer last August, a federal judge ruled Tuesday. File Photo by Ezio Petersen/UPI | License Photo
Feb. 16 (UPI) -- A federal judge ruled Tuesday that investment firms that made loans to cosmetic giant Revlon could keep roughly $500 million Citigroup attempted to recoup.
At issue, was whether Citibank was entitled to get more than $500 million of funds back that it mistakenly transferred in August to Revlon lenders, the court ruling shows.
Citibank intended to wire approximately $7.8 million in interest payments to Revlon lenders on August 11, but it wired almost $900 million of its own money in addition to the $7.8 million.
Since then, some lenders have returned roughly $385 million to Citi while others refused to do so, prompting the legal dispute with 10 asset managers for the lenders, with Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, being among them.
U.S. District Judge Jesse Furman's 105-page ruling Tuesday said that while the law generally treated money that is wired by mistake as "unjust enrichment," there is an exception under New York law where lenders are not notified at the time of the transfer of the mistake.
Furman ruled the exception applied to this case.
"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 wrote.
Robert Loigman of Quinn Emanuel, representing the investment firms, told Bloomberg they were "extremely pleased with Judge Furman's detailed and thorough decision."
Meanwhile, Citigroup said in a statement that it plans to appeal.
"We strongly disagree with this decision and intend to appeal," Danielle Romero-Apsilos, a Citigroup spokesperson said in the statement. "We believe we are entitled to the funds and will continue to pursue a complete recovery of them."
The decision comes amid Citigroup's effort to update underlying controls and technology after regulators fined the company $400 million for deficiencies in those areas last year.