Former Lehman Clients Sue Over Failed Auction-Rate Securities
Two institutional investors are suing Lehman Brothers Holdings, charging the bank of misleading them about the risks of auction-rate securities. The investors, Western Digital Corporation and Ceradyne Inc., are suing Lehman for more than $190 million.
According to the lawsuits, Western Digital and Ceradyne say they suffered devastating financial losses as a result of Lehman’s alleged deception concerning auction-rate securities, which were supposedly liquid financial instruments. The companies contend that Lehman knew, but failed to inform them, that the securities were “not supported by a broad, fully-functioning market.”
Western Digital and Ceradyne are in the same situation as many institutional ARS investors. When the market for auction-rate securities collapsed in February 2008, the products suddenly became illiquid, leaving corporate and retail investors unable to sell their investments at auctions.
Later that same year, a number of Wall Street investment firms and banks agreed to settle charges by state and federal regulators over sales practices of auction-rate securities and bought back millions of dollars worth of the securities from retail investors and small businesses. Larger institutional investors, however, were for the most part left out of the settlement offers. Today, many are still forced to hold onto their toxic instruments.
Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.
