Revlon error forces Citigroup to cut profits by $ 323 million
Citigroup downgraded its fourth-quarter results to $ 323 million after suffering a loss in its legal battle to recover funds it accidentally sent to creditors of its client Revlon.
Citi had hoped to recover $ 500 million it mistakenly sent to the cosmetics company’s lenders, but a federal judge rejected the offer on February 16.
In August, Citi intended to send around $ 8 million in interest payments to funds that had loaned Revlon $ 900 million to finance its acquisition of rival Elizabeth Alden. But due to what Citi called an “operational error” involving incorrect entries in the payment software, all of the principal and unpaid interest was paid.
Several funds refused to return the money, although Citi quickly requested it. A federal judge found that under New York law, lenders were not required to do so, as long as there was no deception. After the judgment, Citi said it intended to appeal and would seek “full recovery” of the funds.
The erroneous payment may have contributed to a $ 400 million fine by banking regulators imposed on Citi in October. Regulators found that Citi had neglected to correct long-standing deficiencies in its risk management and control systems and ordered a review of its technology in these areas.
The bank, which will spend next week in charge of the new CEO Jane fraser, took $ 390 million in additional costs in the fourth quarter, reducing after-tax profits by $ 323 million, according to documents filed with the Securities and Exchange Commission after Friday’s close.
Citi’s final fourth-quarter profits were $ 4.3 billion, down from nearly $ 5 billion a year earlier.