An Italian bank and two of its insurance units sued Citigroup Inc. on Tuesday, alleging it had misrepresented the risk of a fund-linked total return swap in January 2007.

The lawsuit, filed in U.S. District Court in Manhattan, alleges that Citigroup made false and misleading representations that did not allow Banca Carige SpA to understand the true risk of the arrangement.

"The plaintiffs, a bank and its subsidiary insurance companies, had no interest in risky or speculative investments and were looking only to obtain good, consistent returns with as little risk as possible," the lawsuit said.

Banca Carige is seeking at least $47 million in damages.

A Citi spokeswoman said the claims are "without merit."

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