SOURCE: Bernstein Litowitz Berger & Grossmann LLP

July 27, 2011 17:48 ET

Judge Sustains Claims of Former Shareholders of Now-Defunct Lehman Brothers

NEW YORK, NY and RADNOR, PA--(Marketwire - Jul 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.

Contact Information

  • Press Inquiries:

    Kessler Topaz Meltzer & Check, LLP:
    Darren Check, Esquire
    (610) 822-2235

    Press Inquiries:

    Bernstein Litowitz Berger & Grossmann LLP:
    David Stickney, Esq.
    (858) 720-3182

    Steven B. Singer, Esq.
    (212) 554-1413