Rasmusen v. Citigroup Page

New York State ex rel. Eric Rasmusen v. Citigroup, Inc. Page (July 20, 2023)

In General

What Citigroup did. In July 2009 Citigroup issued new stock to the U.S. Treasury and the general public (see here and here and here. When enough ownership changes hands, a corporation loses the ability to set off past operating losses (NOL's) against future income to reduce its income tax (Tax Code Section 382). The U.S. Treasury issued several "Notices" claiming that Section 382 does not apply when the U.S. Treasury is the stockholder. This attracted much adverse comment, and an investigation by the inspector-general which has still to issue its findings. Treasury did not address the exception's illegality, but replied that they needed to do it to save the banks. The special exception had the effect of reducing Citigroup's taxes and raising its stock's value by many billions of dollars.

This lawsuit. New York State's False Claims Act allows private individuals to act as "relators" for the State, suing delinquent taxpayers "qui tam" to compel them to pay their taxes in return for a reward. I, Eric Rasmusen, am the relator. The legal pleadings (the complaint) formally lists my allegations for the court. The suit was initially filed "under seal" so New York Attorney-General Eric Schneiderman could decide whether to join us, which we very much wanted. He has declined, without saying why Citigroup doesn't owe the taxes. If Citigroup owes $800 million in New York tax, the Act trebles that to $2.4 billion. That could fund a rebate of more than $200 for every household in New York State. Whether the actual amount is $800 million we will not know for sure until we see Citigroup's state tax returns.

Removal to Federal Court. In October 2015 Citigroup asked to remove the case from the New York state court to the 2nd circuit federal district court. If a federal court rules that the NOL deductions are improper and Section 382 applies to Citigroup, then Section 383, which deals with tax credits, will apply also. That would not matter to the state taxes, but it would be hugely important for federal taxes, since Citigroup valued its NOL's and tax credits at $21 billion in 2009 and most of that would vanish. In December 2015 Citigroup moved to dismiss, submitting this brief in support. Here is our response brief. Citigroup filed its a reply brief in March 2016. In December 2016 Judge Kaplan ruled that the case had no essential federal question, and remanded it to New York court. Assemblymen inquire. In March 2016, 18 members of the New York Assembly wrote to Attorney-General Schneiderman asking him to explain why he was not joining the lawsuit. The suit made into Law360's "Top 5 Tax Cases To Watch in 2017."

Citigroup refiled its motion to dismiss in State court, submitting this dismissal brief. Citigroup also filed a 10-megabyte pdf file of exhibits--- newspaper articles and such, all in one giant file. Here is my opposition brief and their reply brief. Oral argument was May 17, 2017 before Judge Charles Ramos in lower Manhattan (Center Street courthouse). After hearing Mr. Sinatra and Mr. Polubinski speak, Judge Ramos dismissed the case from the bench (see "Keeping Cases Moving: Ruling from the Bench"). You can see the oral argument transcript and corrections and my annotated excerpts. The best version of the order and judgement I have is here.

The Appeal I appealed to the Appellate Division, First Department, filing the brief in March 2018. I appealed, and lost again, with a very short opinion which merely said that the suit was barred because the allegations were already "publicly disclosed".

For more information, see the FAQs page. The case is New York State ex rel. Eric Rasmusen v. Citigroup, Inc. In federal court it is New York State ex rel. Eric Rasmusen v. Citigroup, Inc., 220 F.Supp.3d 523 (2016). In state court it is New York State ex rel. Eric Rasmusen v. Citigroup, Inc., 75 N.Y.S.3d 903 (2018). The case number in state court is 100175/2013. Docket entries are available by searching the New York court records. The rest of this long webpage consists of links to information about various aspects of the case.

For most people, the following links will be enough: