SOURCE: Stull, Stull & Brody

June 13, 2008 16:30 ET

Stull, Stull & Brody Announces Class Action on Behalf of Shareholders of Downey Financial Corporation

NEW YORK, NY--(Marketwire - June 13, 2008) - Attorney Advertising. Notice is hereby given that a class action has been commenced in the United States District Court for the Central District of California on behalf of purchasers of the common stock of Downey Financial Corporation ("Downey" or the "Company") (NYSE: DSL) between October 16, 2006 and March 14, 2008 (the "Class Period").

Stull, Stull & Brody has substantial experience representing employees who suffered losses from purchases of their employer's stock in their 401(k) plans. If you bought Downey stock through your Downey retirement account and have information or would like to learn more about these claims, please contact us.

The complaint charges Downey and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Downey is a savings and loan holding company. The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company's business and financial results. As a result of defendants' false and misleading statements, Downey's stock traded at artificially inflated prices during the Class Period, reaching a high of $74.85 per share in June 2007.

On October 10, 2007, Downey announced that it expected to incur an operating loss for the 2007 third quarter due to the continued weakening in the housing market. Then, before the market opened on March 17, 2008, Downey released its monthly selected financial results for the 13 months ended February 29, 2008, which showed a significant increase in non-performing assets to almost 11% of total assets, up from 1.2% in May 2007. Downey had to restructure debt for many borrowers to avoid having their loans fail. On this news, Downey's stock dropped to close at $18.82 per share on March 17, 2008, a decline from $19.14 per share on March 14, 2008, and a decline of 68% from $59 per share on October 9, 2007.

According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) defendants' portfolio of Option ARMs contained millions of dollars worth of impaired and risky securities, many of which were backed by subprime mortgage loans; (b) prior to the Class Period, Downey had seen Countrywide's growth and had started to get more aggressive in acquiring loans from brokers such that the loans were extremely risky; (c) defendants failed to properly account for highly leveraged loans such as mortgage securities; (d) Downey had very little real underwriting, which led to large numbers of bad loans that would cause huge numbers of defaults; and (e) Downey had not adequately reserved for Option ARM loans, the terms of which provided that during the initial term of the loan borrowers could pay only as much as they desired with any underpayment being added to the loan balance.

Plaintiff seeks to recover damages on behalf of all those who purchased or otherwise acquired Downey's common stock during the Class Period, which is between October 16, 2006 and March 14, 2008. If you purchased or otherwise acquired Downey's common stock during the Class Period, and either lost money on the transaction or still hold the securities, you may wish to join in the action to serve as lead plaintiff. If you purchased Downey's common stock during the Class Period, you may request that the Court appoint you as lead plaintiff no later than sixty days from May 16, 2008.

A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Stull, Stull & Brody, or other counsel of your choice, to serve as your counsel in this action. Stull, Stull & Brody has litigated many class actions for violations of securities laws in federal courts over the past 30 years and has obtained court approval of substantial settlements on numerous occasions. Stull, Stull & Brody maintains offices in New York and Los Angeles.

If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Tzivia Brody, Esq. at Stull, Stull & Brody by e-mail at SSBNY@aol.com, by calling toll-free 1-800-337-4983, or by fax at 212/490-2022, or by writing to Stull, Stull & Brody, 6 East 45th Street, New York, NY 10017. You can also visit our website at www.ssbny.com.

Attorney Advertising. Prior Results Do Not Guarantee A Similar Outcome.

Contact Information

  • Contact:
    Tzivia Brody, Esq.
    Stull, Stull & Brody
    Email Contact
    1-800-337-4983
    fax: 212/490-2022

    6 East 45th Street
    New York, NY 10017
    www.ssbny.com