Texas AG Says Citi ‘Discriminates’ Against Gun Industry, Halting Muni Business

Citigroup Inc. is once again facing an ouster from the booming Texas municipal-bond market after the state’s Attorney General Ken Paxton’s office determined the bank “discriminates” against the firearms industry.

(Bloomberg) — Citigroup Inc. is once again facing an ouster from the booming Texas municipal-bond market after the state’s Attorney General Ken Paxton’s office determined the bank “discriminates” against the firearms industry. 

The ruling indicates that the New York-based bank runs afoul of a Republican-backed law passed nearly two years ago that bars most government contracts with companies that engage in anti-gun business practices. The decision appears to halt the bank’s ability to underwrite most municipal-bond offerings in the state.

It’s a whipsaw moment for Citigroup. The bank had temporarily halted its work in the Texas muni market after the law went into effect in September 2021 but had revived that business two months later, saying it complies with the law. Paxton’s ruling ends a months-long probe into Citi’s corporate policy.

“It has been determined that Citigroup has a policy that discriminates against a firearm entity or firearm trade association,” Leslie Brock, assistant attorney general chief of the public finance division, wrote in the letter. 

The determination means that Citigroup’s so-called standing letter, a document that had thus far allowed the bank to underwrite debt in one of the nation’s largest public bond markets, has been rejected, according to a Jan. 18 letter distributed to lawyers and viewed by Bloomberg.

“Therefore, until further notice, we will not approve any public security issued on or after today’s date in which Citigroup purchases or underwrites the public security, or in which Citigroup is otherwise a party to a covered contract relating to the public security,” according to the letter. 

Paxton’s office, which is required to sign off on most state and local debt sales in Texas before the transactions are able to close, did not respond to a request for comment.

“We’re disappointed with the decision and will remain engaged with the Texas AG office to review our options,” said Mark Costiglio, a Citigroup spokesperson, in an emailed statement. “Citi has been financing public works in Texas for more than 150 years and we currently have more than 8,500 employees who call Texas home. As we’ve said previously, Citi does not discriminate against the firearms sector and believe we are in compliance with Texas law.”

In 2018, Citigroup announced policies that set restrictions on the firearms industry after a mass shooting at a high school in Parkland, Florida. Citigroup said it would prohibit retailers that are customers of the bank from offering bump stocks — devices that let semiautomatic rifles fire even more rapidly — or selling guns to people who haven’t passed a background check or are younger than 21. The bank’s policy does include exemptions, including one to the under-21 age restriction if a person has military training.

The bank has claimed for more than a year it doesn’t run afoul of the law and has successfully managed multiple transactions, including a $1 billion deal for the Dallas-Fort Worth airport. The National Shooting Sports Foundation, a trade group that spearheaded the legislation, has been questioning the verification. 

Related: Citi’s Gun Policy Probed by Texas AG After Lobby Group Complains

Mark Oliva, a spokesperson for the foundation, said the group is “extremely gratified” with Paxton’s decision enforcing the law which “refuses the ability of ‘woke’ banks to profit from Texan’s tax dollars while at the same time using those profits to pursue policies that deny Texans their Constitutional rights.” 

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