Citigroup Settles
Defamation Suit

Score one for corporate chieftains infuriated by analysts.

Citigroup Inc. yesterday agreed to settle a defamation suit brought by Canadian real-estate tycoon Peter Munk, who controls Trizec Canada Inc., over critical remarks made by Jonathan Litt, a veteran real-estate analyst at Smith Barney.

Citigroup apologized and agreed to make a "generous donation" to a charity selected by Mr. Munk. Both sides declined to comment on the size of the donation, but it appears a Toronto hospital will be receiving two million Canadian dollars ($1.6 million).

The dust-up began on an August 2002 earnings call one day after disappointing quarterly results were released by Trizec Properties Inc., a real-estate investment trust based in Chicago that is 40% owned by Trizec Canada. Mr. Litt startled listeners by lashing into Mr. Munk over his decision to spin off Trizec Properties from what had been TrizecHahn Corp. Mr. Munk is chairman of Trizec Properties.

"He needs to wake up to the new world of corporate governance," Mr. Litt said of Mr. Munk on the call. "Just turn on the TV this morning and he would see two WorldCom executives being arrested. More shareholder dollars have been spent trying to preserve his tax basis than enhancing shareholder value."

In a written report later that day, Mr. Litt said he was forwarding his report to New York Attorney General Eliot Spitzer, the Securities and Exchange Commission, and other regulators. Mr. Litt downgraded Trizec from "outperform" to "sell," and lowered his target share price from $18 to $8. Mr. Litt, a longtime REIT analyst who joined Citigroup's Smith Barney unit in 2000, has long been known for outspokenness.

After furious Trizec officials complained to Smith Barney, Mr. Litt reissued the report, noting this time that he didn't intend to notify regulators after all. Trizec's stock dropped sharply, although Mr. Litt wasn't the only analyst to turn negative on the company.

After 13 months had passed, Trizec Properties, and Trizec Canada and Mr. Munk, who is also founder and chairman of Barrick Gold Corp., sued Mr. Litt and Citigroup's brokerage unit in Ontario Superior Court of Justice, the top provincial-court level below the appellate tier, seeking at least C$10 million in damages. The suit said Citigroup and Mr. Litt "falsely represented and imputed" that Mr. Munk, now 77 years old, was "engaged in criminal wrongdoing and/or breach of duty," among other things.

At that time, a Citigroup spokeswoman defended Mr. Litt, maintaining he had "acted in the best interest of our investing clients, correctly called the six-month selloff in Trizec shares and precisely predicted the downside target."

Trizec's problems with bad investments and expensive developments that didn't pan out were well known in the industry. Between 2000 and 2002, it posted $1.18 billion of write-offs.

Calls yesterday to Mr. Litt were referred to a Citigroup spokeswoman, who declined to elaborate on the brief announcement of the settlement and apology. She said Mr. Litt remained an analyst in good standing at Citigroup.

Meanwhile, Tennys Hanson, president and chief executive of Toronto General & Western Hospital Foundation, said she was informed yesterday morning that Toronto General Hospital's Peter Munk Cardiac Centre would receive the donation.

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