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How the Big Banks Are Trying to Destroy Our Justice System

Meet the lawyer who keeps getting Citigroup off the hook for fraud.

The following is Part II of an investigative series on Citigroup and fraud. Part 1, which reveals that Citigroup may have defrauded Abu Dhabi of billions, can be read  here.

It’s one of the few things predictable on Wall Street; an immutable signature on the reply briefs whenever Citigroup is charged with fraud – and that is quite often.

Brad Karp, a partner at the 737-attorney-strong Wall Street law firm, Paul, Weiss, Rifkind, Wharton & Garrison LLP, has been Citigroup’s go-to guy for fraud allegations since the company was born out of the too-big-too-fail merger of Travelers Group insurance, its myriad Wall Street investment banks, brokerage units, and Citicorp, parent of Citibank.

When the London-based private equity firm, Terra Firma, claimed it had been lied to and defrauded by Citigroup, making it overpay for the purchase of EMI, a British music label, in 2007, Karp and colleagues wrung an 8-0 decision from the jury in favor of Citigroup. Karp was also on hand to witness victory when the trustee for the bankrupt Italian dairy giant, Parmalat, charged Citigroup with fraud. Then there were fraud charges connected to Citigroup’s involvement in the collapse of WorldCom AND Enron – along with auction rate securities, rigged stock research and understating its exposure to subprime debt by $39 billion. Karp, Karp, and more Karp.

The litany of fraud charges against Citigroup, accompanied by the perpetual get-out-of-jail-free card reliably delivered by Brad Karp, has become so ubiquitous that it raises the obvious question: is Citigroup the hapless target of a world-wide network of frivolous lawsuit filers, or does Brad Karp have some secret sauce for getting a serial miscreant off the hook?

As reported in  Part I, something of an international incident involving Citigroup has spilled into a federal court i Manhattan, and again, it has Brad Karp’s name all over the reply briefs filed on behalf of Citigroup. The investment arm of an ally and trading partner to the United States, Abu Dhabi Investment Authority (ADIA), has charged Citigroup with lying and defrauding it of $4 billion in connection with a $7.5 billion investment it made when Citigroup was teetering in November 2007.

ADIA has asked the court to throw out an arbitration panel’s decision in favor of Citigroup. The court has  sealed much of the record, but a careful reading of public filings and other government documents shows a Wall Street justice system as systemically corrupted as the subprime products that imploded the U.S. housing market and financial system in 2008.

Under a confidentiality agreement ADIA signed with Citigroup, the details and written decision of the arbitration cannot be made public. (Judge George B. Daniels, presiding over the case in the U.S. District Court for the Southern District of New York, might possibly entertain press requests that it is in the public interest to air all details of this matter.) All claims were to be administered and heard by the International Centre for Dispute Resolution of the American Arbitration Association (AAA), a group that substitutes its own “neutral” arbitrators for judge and jury.

The Board of Directors of AAA includes lawyers from most of the major Wall Street law firms. Its Board list of 2011-2012 includes representation from Allen & Overy LLP – the firm that created the Structured Investment Vehicles that helped crater Citigroup in 2008; Sullivan & Cromwell, LLP – the firm that served as advisor to Citigroup on its deal with ADIA as well as adviser on the $12.5 billion Group of Six deal on January 15, 2008 that caused ADIA’s value in its deal to collapse; Skadden, Arps, Slate Meagher & Flom, also an advisor to Citigroup on the Group of Six investment; Simpson Thacher & Bartlett LLP, whose law partner Roy Reardon served as an arbitrator in the ADIA matter; Quinn Emanuel Urquhart & Sullivan LLP, the firm representing ADIA in the arbitration against Citigroup, to name but a few.

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