Tuesday, October 21, 2008

Lehman Class Action Filed for Series J Preferred Investors

According to the Complaint, the Prospectus for the Lehman Preferred Stock J contained material misstatements and omissions. Specifically, it is alleged that the representations made in Lehman's Prospectus were materially false and misleading because at the time of the Offering, Lehman was already laboring under several negative factors that were not properly disclosed in the Prospectus, including the failure to set aside adequate allowances to cover Lehman's steadily increasing portfolio of underperforming subprime related products, and to adequately write-down residential and commercial mortgage and real estate assets. At the time, these factors were already causing a material adverse affect on Lehman's operations and led directly to the firm's announcement of September 15, 2008, that it would be seeking protection under the Federal Bankruptcy Code. Lehman would eventually be credited for initiating the largest bankruptcy filing in U.S. history.

The Complaint further alleges that Citigroup and other Defendants could have, and should have, discovered the misstatements and omissions in Lehman's Prospectus prior to its filing with the SEC and distribution to the investing public. As a result of an inadequate due diligence investigation on the part of Citigroup and other Defendants, the underwriters failed to discover the misstatements and omissions in Lehman's Prospectus on the Preferred Stock J.

On September 15, 2008, pursuant to Chapter 11 of the Federal Bankruptcy Code for the Southern District of New York, Lehman voluntarily filed a petition to reorganize the Company. Lehman's bankruptcy became the largest bankruptcy filing in history and essentially wiped out the investment interests of investors of Lehman Preferred Stock J. Due to the issuance of various false and misleading statements, the market price of Lehman Preferred Stock J was artificially inflated.

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