ABU DHABI INVESTMENT AUTHORITY SUES CITI

C O N F I D E N T I A L ABU DHABI 001161 SIPDIS NOFORN DEPARTMENT FOR NEA/ARP/BMCGOVERN AND EEB/IFD/OMA E.O. 12958: DECL: 2019/12/22 TAGS: EFIN EINV ECON AE SUBJECT: ABU DHABI INVESTMENT AUTHORITY SUES CITI CLASSIFIED BY: Richard G. Olson, Ambassador, State, Embassy Abu Dhabi; REASON: 1.4(B),(D) ¶1. (SBU) On December 15, Citigroup announced that the Abu Dhabi Investment Authority (ADIA) had filed an arbitration claim based on Citi's alleged misrepresentation of ADIA's November 2007 $7.5 billion investment. The arbitration claim seeks $4 billion in damages. ADIA originally agreed to buy Citi securities that yielded 11 percent annually and would convert to 235.6 million shares (a 4.9 percent stake) at prices ranging from $31.83 to 37.24 starting in March 2010. Since then, Citi's stock price has fallen to less than $3.50/share. Adding to ADIA's losses, Citi's recent issuance of 5.4 billion new shares significantly dilutes ADIA's original 4.9 percent stake. ¶2. (C/NF) A well-connected expatriate financial consultant told the Ambassador on December 16 that this stock dilution finally spurred ADIA to take action. ADIA Senior Legal Advisor William Brown told EconOff on December 17 that ADIA, as an investment entity representing Abu Dhabi's citizens, must exercise its fiduciary duty. Failure to do so would damage ADIA's reputation as a sovereign wealth fund for the people of Abu Dhabi. Brown said ADIA was historically disinclined to take legal action, but advisors finally convinced the leadership to act. Brown unequivocally stated that Citi "lied" and must be held accountable. OLSON