MAT/ASTA Investor Report
Investors who purchased MAT/ASTA between 2002 through 2005 may mistakenly believe that they have waited too long and it is too late to pursue a claim for damages against Citigroup. Fortunately, this is not the case. Recently, two MAT/ASTA investors represented by Florida attorney Bob Pearce were awarded $1.8 million because Citigroup mismanaged the funds. See Gerald J. Kazma, as Trustee of the Gerald J. Kazma Revocable Trust, et al. vs. Citigroup Global Markets, Inc., et al, FINRA Dispute Resolution Arbitration Number 09-02697.
The arbitrators in that case specifically found that Citigroup and Citigroup Alternative Investments, LLC negligently mismanaged the MAT/ASTA funds and negligently supervised their employees. Because this mismanagement began during 2006 and continued through early 2008, even early investors in the funds are now eligible to pursue their claims. While statutes of limitation may bar claims based on deceitful sales practices such as misrepresentation and omission for some early MAT/ASTA investors, claims based on mismanagement and negligent supervision in 2006 and 2007 remain actionable under the laws of most states. The impact of the decision is that it greatly expands the number of potential clients who can pursue valid claims against Citigroup and its affiliates.
While there is, of course, no guarantee that other arbitration panels will follow the Kazma award and reach the same conclusion, the decision is nonetheless significant in that it gives many MAT/ASTA investors the opportunity to finally recover the damages they sustained through no fault of their own.AWARD
"Respondents are liable, jointly and severally, for negligent management and negligent supervision and shall pay to Claimant Kazma compensatory damages in the sum of $908,648.00 ...
Respondents are liable, jointly and severally, for negligent management and negligent supervision and shall pay to Claimant ACM compensatory damages in the sum of $908,648,00 ..."
Total Award: $1,817,296.00Municipal Arbitrage Gone Bad: Citigroup's MAT/ASTA Debacle
Sold to Investors as a Low-Risk, Fixed Income Alternative, MAT/ASTA Was Anything But
The MAT/ASTA Funds - MAT/ASTA Finance, MAT/ASTA Two, MAT/ASTA Three and MAT/ASTA Five - are a series of municipal arbitrage hedge funds offered by Citigroup Fixed Income Alternatives that Smith Barney and Citigroup Private Bank sold throughout the country between 2002 and 2007.
High net worth individuals, family trusts, partnerships and other entities invested nearly $2 billion in the funds in reliance on the representations of financial advisors and private bankers promoting MAT/ASTA as a "unique" municipal bond "opportunity" that would generate slightly higher returns than traditional fixed income investments.
Because Citigroup Private Bank and Smith Barney touted MAT/ASTA as having all the benefits of municipal bonds with only a little greater risk, it was sold as - and certainly seemed to be - a relatively safe investment. Not surprisingly, those who invested in MAT/ASTA were primarily conservative investors - at least with the fixed income portion of their portfolios - who had no desire or intention of putting their principal at risk. They believed, as they had been told by their financial advisors and bankers, that MAT/ASTA truly was a "fixed income alternative." The monthly account statements that investors received clearly stated that MAT was indeed a "fixed income alternative." But, hidden in the fine print, CFIA told a different story "...the fund is not a fixed income alternative and has a risk profile more similar to an equity investment."
Much to the MAT/ASTA investors' surprise and dismay, all of the funds imploded in early 2008 resulting in huge losses for investors. As of February 2008, ASTA/MAT Finance lost approximately 71 % of its value, ASTA/MAT Two lost approximately 70%, ASTA/MAT Three lost approximately 80%, and ASTA/MAT Five lost an astounding 97%.
Although Citigroup attributed the losses in MAT/ASTA to a "perfect storm" of unexpected events in the municipal bond market, these events were both common historically and actually expected by the firm. From 2006 forward, MAT/ASTA managers deliberately disregarded the only investment strategy they had told investors the funds would adhere to, and failed to heed numerous red flags and warning signs that disaster loomed on the horizon. Investors' net losses in MAT/ASTA were and still are - substantial.
Mr. Pearce, a former SEC attorney with over 35 years experience, focuses his practice on securities matters. He is a member of the Public Investors Arbitration Bar Association and serves as Chairperson of the SPBCBA Securities Committee. Mr. Pearce has represented hundreds of investors in securities arbitration and have prosecuted multiple MAT/ASTA arbitration claims. He is currently representing almost 50 clients throughout the country in MAT/ASTA cases.
The Law Offices of Robert Wayne Pearce, P.A. follows a multi‑theory approach encompassing three separate bases for recovery, depending on the facts and circumstances of the particular investor's case. These include: (1) MAT/ASTA was a flawed investment product; (2) Citigroup and its affiliates misrepresented and failed to disclose material facts at the time the investor was sold the investment; and (3) Citigroup and its affiliates were guilty of negligent mismanagement of MAT/ASTA and negligent supervision of their employees. We believe that this approach gives investors three separate bases for recovering damages and enhances the likelihood of an award. We prefer not to put all of our clients' "eggs in one basket."
If you are seeking a law firm with integrity, dedication, and substantial experience in MAT/ASTA fraud and mismanagement disputes, please schedule a confidential consultation with Mr. Pearce today. Call our firm at (561) 338-0037 or toll-free at 1-800-732-2889, or fill out our intake form to schedule your free consultation.