Archive for the “Credit Suisse” Category

More institutional investors are coming out on top in their cases involving auction-rate securities. Last month, a Financial Industry Regulatory Authority (FINRA) arbitration panel awarded $9.8 million to Catalyst Health Solutions in its auction-rate securities case against Credit Suisse Securities.

Catalyst Heath Solutions, which manages prescription drug benefits, is just one of many institutional investors to take legal action against Credit Suisse after the ARS market came to an abrupt standstill in February 2008. Following the market’s collapse, institutional and retail investors alike were left financially hammered, unable to liquidate their supposedly liquid investments.

Ultimately, regulatory settlements were reached with a number of broker/dealers that marketed and sold auction-rate securities to investors. Most of the agreements, however, benefited retail ARS holders, not institutional investors.

In 2009, another institutional investor, STMicroelectronics NV, also successfully won its case against Credit Suisse when a FINRA arbitration panel ordered the brokerage to pay STMicroelectronics NV more than $406 million to settle claims that it misled the semiconductor maker into buying auction-rate securities.

On May 27, 2010, FINRA again ruled in favor of an investor’s arbitration claim against Credit Suisse. This time, the panel found Credit Suisse liable to Luby’s Inc. Specifically, FINRA ordered Credit Suisse to buy back the auction-rate securities at par and to pay interest on them at the par purchase price of 6% per annum from and including May 29, 2010, through and including the date the award is paid in full.

According to Luby’s Feb. 10, 2010, quarterly filing, the company held $7.1 million par value or $5.2 million fair value in auction-rate securities.

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.

A Financial Industry Regulatory Authority arbitration panel has ordered Credit Suisse Securities to pay an institutional investor - Catalyst Health Solutions - $9.8 million in a case tied to auction-rate securities backed by student loans.

Credit Suisse Securities is the U.S. broker/dealer unit of Credit Suisse Group. Catalyst Health Solutions is a Rockville, Md., company that manages prescription drug benefits. Catalyst filed its case last year, accusing Credit Suisse of fraud, negligence and selling unsuitable investments.

For the past two years, retail and institutional investors have been waging legal wars against Wall Street over auction-rate securities. The problems began in February 2008 when the $330 billion ARS market abruptly came to a standstill, leaving investors who thought their money was as liquid and safe as cash in severe financial straits.

Following investigations by state and federal regulators, a number of Wall Street firms agreed to buy back ARS holdings from retail clients. The majority of institutional investors, however, were left of the equation.

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.

The verdict for Eric Butler is five years in prison for fraudulently selling risky auction-rate securities that ended up costing investors more than $1.1 billion in losses. The ex-Credit Suisse broker also was fined $5 million.

Butler was convicted of securities fraud and conspiracy to commit securities fraud back in August. At the time, prosecutors were seeking a 15-year prison sentence.

One month earlier, Butler’s partner - Julian Tzolov - pleaded guilty to fraud, conspiracy charges and bail-jumping after previously fleeing the country. His sentencing is set for April 27, 2010.

Prosecutors in the case accused Butler and Tzolov of trying to take in bigger commissions by convincing clients they were investing in safe, conservative securities backed by federally guaranteed student loans. The scheme began to backfire in the fall of 2007 as auctions for the investments started to fail.

Institutional investors in particular suffered millions of dollars in losses as a result of the former brokers’ actions. Among the companies affected: STMicroelectronics NV (which later sued Credit Suisse and was awarded $406 million by the Financial Industry Regulatory Authority), Potash Corp of Saskatchewan Inc. and Roche Holding AG.

The case against Butler marks one of the first criminal prosecutions related to the credit crisis.