NEW YORK (CNN/Money) - Adding to the list of potential problems facing Citigroup, a lawsuit says the firm's former Travelers Insurance unit provided a private company controlled by WorldCom's ex-CEO Bernard Ebbers with $679 million in loans, a published report said Monday.

The suit was filed Friday in the U.S. District Court for the Southern District of New York by State Comptroller Carl McCall, who is running for governor and is also trustee of the New York State Common Retirement Fund, according to the Wall Street Journal.

The fund, which paid more than $300 million for WorldCom shares that are now worthless, alleges in the lawsuit that analysts at Citigroup's Salomon Smith Barney unit may have kept an overly positive rating on WorldCom's stock to ensure that the loans from its former Travelers unit were repaid by Ebbers, the paper reported. The loan was apparently secured with WorldCom stock, the newspaper said.

"Citigroup, Salomon's parent, was on the hook for huge loans, whose value rode on the strength of WorldCom's stock -- powerful incentive to maker sure public perception of the company, and its share price, did not suffer," the complaint says, according to the Journal.

The suit alleges Salomon's former telecom analyst Jack Grubman and others helped Ebbers secure $679 million in loans for his Joshua Timberlands LLC company. It's unclear if the loans remain outstanding or what interest rate the loans carried, the paper reported.

The complaint adds that several months after Ebbers' company received the loans, WorldCom selected Citigroup's Salomon as the lead underwriter for a $5 billion bond offering in 2000 and then for a $12 billion bond offering in 2001, according to the Journal.

Citigroup is also under scrutiny for allegedly doling out shares of hot initial public offerings to various CEOs, including Ebbers, to lure investment banking deals.

Last month, New York Attorney General Eliot Spitzer sued Ebbers and four other telecom executives, alleging they improperly profited from hot initial public offerings given in return for investment banking business. New York-based Salomon was not named in the suit.

Shares of Citigroup (C: Research, Estimates), which spun off its Travelers (TAP.A: Research, Estimates) unit in early 2002, gained $1.83 Friday to close at $30.40.