A lawsuit filed by a Calgary couple claims that during the financial chaos triggered by the COVID-19 pandemic, Citibank improperly sold off millions of dollars worth of shares they had posted to secure a loan.
Robert and Laurene Yurkovich’s court action alleges Citibank took advantage of the COVID-19 pandemic and the oil price war between Russia and Saudi Arabia to dump 75 per cent of the shares the couple posted as collateral.
“This case is about a global financial institution engaging in opportunistic bad faith conduct in respect of two of its individual clients during the height of the 2020 COVID-19 pandemic and global market instability,” their statement of claim alleges.
The lawsuit says Citibank held shares belonging to the Yurkoviches as security for a loan, as well as cash belonging to them that was also applied to the outstanding borrowed money.
“Although the loan was not in default or at risk, when the share price was temporarily depressed due to the COVID-19 pandemic and other macro geopolitical events . . . without authority, justification or reasonable notice, Citibank sold 75% of the shares,” the claim states.
The sale yielded $20.2 million, “less than half of what the shares were worth only a few months earlier,” which Citibank applied to the loan, the lawsuit says.
“Citibank also applied $6.2 million of the Yurkoviches’ cash to the loan, again without authority or justification.”
It says the financial institution had a contractual “obligation to observe reasonable standards of fair dealing.”
“Citibank sold the Yurkoviches’ shares during a pandemic, when the stock market was in a downward spiral and when the Yurkoviches had limited ability to access legal protection through the courts. Citibank has flagrantly violated its obligation of good faith.”
The claim goes on to detail how the couple initially negotiated a line of credit of US$15.5 million in 2018 and pledged shares in Tourmaline Oil Corp. as collateral.
That agreement stipulated the Tourmaline stock maintained a price of at least $10 a share.
In 2019, the loan amount was increased, first to US$20 million and then to US$35 million.
But the lawsuit claims that after the pandemic and the oil price war between Russia and Saudi Arabia hit in early 2020, the parties agreed to enter into a “collar hedging agreement,” setting the floor price for the collateral at $7.25 a share.
Despite that agreement, the claim alleges, on March 19 Citibank sold off 2,604,000 of the Tourmaline certificates at $7.76 a share, causing the market price to drop even further, to $7.44.
The lawsuit says that despite the plunging prices, analysts have forecasted Tourmaline’s 12-month target price at above $20.
“The contractual and statutory duties of good faith and honest performance prohibited Citibank from disposing of assets in an artificially and temporarily substantially depressed market.”
A statement of defence disputing the unproven allegations hasn’t been filed.