The demise of the auction-rate securities market created financial havoc for retail and institutional investors alike. People lost fortunes and companies went bankrupt. One such company was LandAmerica 1031 Exchange Services and its parent company, LandAmerica Financial Group. Now, two-plus years later, the trustee for LandAmerica says others also bear blame for the exchange company’s downfall.
Earlier this summer, attorneys for LandAmerica’s liquidating trustee issued subpoenas to both Sun Trust Banks and Citigroup for information related to auction-rate securities sales. The story was initially reported July 17 by the Richmond Times-Dispatch. According to the article, more than 1 million documents have been accumulated in the matter so far.
In February 2008, when the auction-rate securities market came to a standstill, LandAmerica had more than $200 million of client funds invested in auction-rate securities. The issue now is whether the exchange company’s brokers - i.e. SunTrust Robinson Humphrey and Citigroup’s Smith Barney unit - falsely represented the liquidity of the investments to investors.
Countless clients who invested with LandAmerica and the supposedly safe auction-rate securities lost everything when LandAmerica closed shop. Case in point: Jean Ann Simmons. As reported back in March by McClatchy Newspapers, the Simmons family entrusted LandAmerica with more than a quarter of a million dollars of their money. A day before Thanksgiving 2008, Simmons arrived at her Texas home to find a one-page letter notifying her that LandAmerica was going out of business.
According to the article, the Simmonses’ money, which came from selling a farm that had been in the family for decades, was gone.
“Like the game of musical chairs, the music stopped and the current 400-plus exchangers were left standing,” said one lawsuit against LandAmerica officials and SunTrust.
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