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| Volume No. 1 Issue No. 29 - Monday, September 30, 2002 |
Dominica Government Sues Citibank
 by Thomson Fontaine
In the high stakes world of finance and in the on-going debacle of powerful US companies, the decision by the Dominica government to sue Citibank could feature prominently.
In an article featured in the TIME magazine issue of October 7, 2002 titled Predators in Paradise?, the paper disclosed the inside story of how lenders at Citibank allegedly played loan shark, charging Caribbean nations including Dominica excess fees and interest payments.
In 1998, the then United Workers Party government approached the Trinidad branch of Citibank to float bonds as a means of raising cash for the building of the international airport.
According to documents obtained by TIME on the terms of the deal, the airport was to be financed in part by bonds to be secured by a $2.8 million "sinking fund", or money loaned in excess of construction needs and managed by Citibank.
But instead of investing the sinking fund elsewhere, the documents show, Citibank used the fund to buy up the airport bonds and convert them into a different kind of bond that reaped a higher premium, without telling the government of Dominica.
The suit filed in July by the government of Dominica against Citibank accuses it of extracting secret profits of about $1.8 million from the transaction, on a bond issue that lacked proper security and provided, in effect, only $14.2 million in financing.
The terms of the deal and the outcome of the lawsuit is been watched closely by Caribbean governments and regulators in the US where the parent company Citi is under scrutiny from at least five investigating bodies. Among the government agencies accusing Citi is the Federal Trade Commission (FTC), which earlier settled a suit accusing Citi of predatory lending.
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