RADNOR, PA — August 1, 2011 On Friday, July 29, 2011, District Judge P. Kevin Castel of the United States District Court for the Southern District of New York sustained federal securities fraud claims brought by shareholders and investors of Bank of America Corporation (“BoA”) arising out of its $50 billion acquisition of Merrill Lynch & Co., Inc. (“Merrill Lynch”) in the midst of the financial crisis.
Plaintiffs, which include State Teachers Retirement System of Ohio, the Ohio Public Employees Retirement System, the Teacher Retirement System of Texas, Stichting Pensioenfonds Zorg en Welzijn, represented by PGGM Vermogensbeheer B.V., and Fjärde AP-Fonden, alleged that BoA and Merrill Lynch, along with certain officers and directors of both companies, including Kenneth Lewis, BoA’s CEO, and Joseph Price, BoA’s CFO, issued a series of materially false and misleading statements to shareholders and investors in connection with the merger. Specifically, Plaintiffs alleged that these defendants misrepresented Merrill Lynch’s financial position by failing to disclose that the company had suffered tens of billions of dollars in losses during the fourth quarter of 2008. Plaintiffs also alleged that the defendants failed to disclose a secret agreement between the companies allowing Merrill Lynch to pay up to $5.8 billion in bonuses to its executives and employees in December 2008 notwithstanding these losses.
Last summer, Judge Castel upheld Plaintiffs’ fraud claims related to defendants’ failure to disclose the secret bonus agreement. On Friday, he also sustained Plaintiffs’ loss-related claims against BoA, Lewis, and Price. Specifically, Judge Castel found that “plaintiffs have alleged with particularity that BofA received ongoing updates on Merrill’s finances,” including its rising loss figures for the fourth quarter of 2008, and that Lewis and Price were at least reckless in failing to make appropriate disclosures regarding these losses to BoA shareholders and investors.
Co-Lead Counsel Kessler Topaz Meltzer & Check, LLP, Bernstein Litowitz Berger & Grossmann LLP, and Kaplan Fox & Kilsheimer LLP are pleased that the Court has upheld the central allegations in this matter, and look forward to the commencement of discovery. Co-Lead counsel views Judge Castel’s ruling as a major victory not only for BoA shareholders and investors, but for shareholders of all companies involved in major corporate transactions. For more information please visit www.bankofamericasecuritieslitigation.com.
Judge Sustains Claims of Former Shareholders of Now-Defunct Lehman Brothers
NEW YORK, NY and RADNOR, PA — July 27, 2011 Today, in one of the most significant class action lawsuits to arise out of the financial crisis, District Judge Lewis A. Kaplan sustained, in large part, claims asserted by former Lehman Brothers shareholders in a federal securities action related to the company’s 2008 collapse. In a 106-page opinion, Judge Kaplan of the United States District Court for the Southern District of New York held that plaintiffs had sufficiently alleged federal securities claims against former officers and directors of Lehman Brothers, including former CEO Richard S. Fuld and former CFO Erin Callan, Lehman’s auditor, Ernst & Young, and fifty-one underwriters that assisted Lehman Brothers in issuing billions of dollars in now-worthless securities to the investing public prior to its bankruptcy.
Plaintiffs, which include Alameda County Employees’ Retirement Association, the Government of Guam Retirement Fund, the Northern Ireland Local Government Officers’ Superannuation Committee, the City of Edinburgh Council as Administering Authority of the Lothian Pension Fund, and the Operating Engineers Local 3 Trust Fund, had alleged, among other things, that the defendants materially misrepresented Lehman’s financial position through the use of “Repo 105” transactions, and made material misstatements and omissions regarding Lehman’s risk exposures and risk management systems.
Judge Kaplan found that Lehman’s use of “Repo 105” transactions, which the company used to artificially improve its reported capital position by temporarily removing assets from its balance sheet at quarter-end, “paint[ed] a misleading picture of the company’s financial position at the end of each quarter.” He also found that the defendants’ repeated statements regarding the “strong” and “conservative” nature of Lehman’s risk management systems were materially false and misleading “given the allegations of frequent, significant departures from Lehman’s internally stated policies.”
Co-Lead Counsel Bernstein Litowitz Berger & Grossmann LLP and Kessler Topaz Meltzer & Check, LLP are pleased that the Court allowed shareholders’ core allegations in this matter to proceed, and look forward to proving the allegations in the Complaint. Co-Lead Counsel views the Court’s decision as an important victory for shareholders whose investments were decimated by Lehman’s demise.
Jury Finds BankAtlantic Lied To Stockholders Over Risky Loans Jury verdict in rare securities fraud case; Barroway Topaz represents institutional investor plaintiffs; award cites bank’s failure to disclose extent of troubled real estate loans and false statements.
MIAMI/NEW YORK (November 18, 2010) – In a rare courtroom trial of a securities fraud class action, a federal jury in Miami has awarded a group of institutional investors a verdict finding securities fraud against BankAtlantic Bancorp, Inc. and two senior officers for lying about and failing to disclose the extent of risk in its troubled loan portfolio in 2007. This is the first securities class action case arising out of the financial crisis to go to jury verdict. The jury found that investors overpaid by $2.41 per share between April 26, 2007 and October 26, 2007 which resulted in millions of dollars in damages for the class.
Investors were represented jointly at trial by leading plaintiffs’ law firms Labaton Sucharow LLP and BarrowayTopazKesslerMeltzer & Check LLP. Labaton Sucharow represented State-Boston Retirement System, lead plaintiff in the federal class action lawsuit. Barroway Topaz represented Erie County Employees’ Retirement System as co-class counsel.
This was only the 12th securities fraud class action to go to trial since passage of the historic Private Securities Litigation Reform Act in 1995 – the vast majority of such cases settle before reaching a courtroom. The PSLRA allowed institutional investors to serve as lead plaintiffs in federal securities actions. It is believed that this is the second successful plaintiffs verdict in a securities class action case led by a public pension fund.
During the four-week trial, investors accused Ft. Lauderdale-based BankAtlantic of serial misrepresentations and omissions regarding the extent of the high risk loans in its so-called “land loan” portfolio – those made for acquisition and development of residential buildings in Florida – between October 2006 and October 2007. Prior to trial, Southern District of Florida Judge Ursula Ungaro ruled that four statements made by BankAtlantic Chairman and CEO AlanLevan about the health of the bank’s land loan portfolio were false. Levan made those statements on a July 2007 conference call with investors, four months after writing an internal email admitting, “I believe we are in for a long sustained problem in this sector.”
“We’re gratified the jury held BankAtlantic and its senior management accountable for misleading investors and causing millions of dollars of losses,” said Labaton Sucharow partner Mark Arisohn, plaintiffs’ lead trial attorney. “BankAtlantic knew of the high risk that was growing in its loan portfolio but for a year lied to its stockholders about the extent of that risk. Florida citizens on the jury sent a message by finding the defendants committed securities fraud. Banks and their management cannot intentionally mislead their stockholders about the extent of lending risk,” added Arisohn.
The jury also was shown extensive e-mails from a BankAtlantic lending manager, who described the bank’s major loan committee as “asleep at the wheel.” In one communication about a loan, the executive wrote, “I hate these deals and think the MLC is blinded by GREED and focused only on [interest] rates…We never analyze the risks up front, only on the downside, when the learning curve is steep and most expensive.”
In an email dated November 30, 2007, the lending manager wrote: “We all have problems when we make loans … but being this dishonest and hiding the problems so long until you can’t any longer, is cause for termination and borderline criminal.”
“The trial opened a most revealing window into fundamentally dishonest reports BankAtlantic made to its stockholders about the riskiness of its land portfolio,” said Barroway Topaz partner AndrewZivitz, who along with partner MatthewMustokoff shared trial duties with the Labaton Sucharow firm. “The jury’s award represents a clear rebuke for the bank’s deceitful disclosure practices. But it’s also an historic success for investors who were victimized by the bank’s behavior.”
Labaton Sucharow also represented investors in litigation alleging securities law violations by Countrywide Financial Corporation, one of the largest providers of consumer housing loans prior to the bursting of the housing bubble. The $624 million proposed settlement in that litigation is the second-largest securities settlement of 2010.
Barroway Topaz is currently representing a group of U.S. and European pension funds in a shareholder class action in federal court in New York against Bank of America related to its purchase of Merrill Lynch, one of the most significant shareholder cases currently before the Court.
The full case caption for the BankAtlantic case is, In re BankAtlantic Bancorp, Inc. Securities Litigation (No. 07-61542 S.D. Fla.).
