How Citi Got (Some Of) Its Money Back

Highland Capital has repaid Citi, which in turn dropped its lawsuit against the company.



Citibank’s lawsuits seem to be working: one asset manager that received its “mistaken” loan payment from the bank has returned the money.

On Thursday, the court dropped Citi’s complaint against Highland Capital Management after Highland repaid Citi $243,580.

Highland’s decision to pay its relatively small cut of the $900 million Citi accidentally repaid lenders to personal care company Revlon comes exactly a week after Citi filed its suit against the firm. The lawsuit — and three others — stem from 2016 loans to Revlon.

Citi was the administrative agent on those loans, facilitating payments between Revlon and the lenders. The bank repaid the loan in full earlier this month, but only some of the lenders have returned their cut of the money.

Here’s why: Over the past year, Revlon allegedly transferred intellectual property that was collateral for the loans to a second loan. The 2016 lenders took action, attempting to replace Citi as the loan facilitator with UMB Bank. But Revlon pushed back. And so, on August 12, UMB Bank filed a lawsuit on behalf of the lenders against Revlon and Citi. Many of the lenders Citi accidentally repaid believe that the payment could not have been in error, given the circumstances.


[II Deep Dive: Four Lawsuits, 17 Companies, and $900 Million: The Story Behind Citi’s ‘Mistaken’ Loan Repayment]

Citi’s attorneys revealed on Monday via a court filing that the mistaken repayment was the result of “human error.”

“Highland has returned the funds that were mistakenly transferred,” a spokesperson for Citi said via email Thursday. “We hope the other defendants will do the same.” A spokesperson for Highland declined to comment.

According to the filing, Citi’s loan processing software requires certain manual adjustments that prevent the payment of a loan’s outstanding principal. And so, on August 11, when Citi attempted to pay interest on loans, an employee didn’t make the adjustments necessary, and a manual check didn’t catch the error.

“As a result of a review undertaken last year, we are in the process of upgrading our loan operations platform,” a spokesperson for Citi said via email. “We take pride in the role that we play as a global leader in financial services and recognize that an operational error of this nature is unacceptable.”

The spokesperson added that Citi has put “significant, additional controls” in place until the upgraded operations platform is functioning.

Although Citi’s complaint against Highland has been dropped, 11 asset managers remain locked in their legal dispute. According to Citi’s complaints, a total of $526.4 million has yet to be returned. That money has been frozen by court order, and will remain so until the judge makes a decision in the case.

“While many lenders have recognized the payment was in error and returned several hundred million dollars so far, other lenders have either refused to return or have not committed to return the funds,” a spokesperson for Citi said via email.