[JURIST] A federal judge on Wednesday ruled [opinion, PDF] that most claims in a lawsuit against former Lehman Brothers Holdings [corporate website] officials could proceed. The plaintiffs, a group of investors, contend that Lehman’s former officers, directors, and auditors, as well as
security underwriters acted in violation of the Securities Act of 1933 and the Securities Exchange Act of 1934 [texts, PDF]. The former officers allegedly made oral statements and published materials and prospectuses containing misleading and false information about the transactions that took place at the company. The investors incurred losses when Lehman went bankrupt in 2008. US District Court for the Southern District of New York [official website] Judge Lewis Kaplan allowed a majority of the claims to proceed, but determined that the plaintiffs did not have standing to sue with respect to fifty principal protection notes (PPNs), a type of structured security. Kaplan also dismissed several of the plaintiffs’ claims against Ernst & Young LLP [corporate website], Lehman’s independent auditor, but rejected the defendant’s motion to dismiss claims that Ernst & Young knew that Lehman was using repurchasing agreements. The plaintiffs are also seeking certification [WSJ report] as a class action.
Lehman Brothers Holdings filed suit [complaint, PDF] against JPMorgan Chase & Co. [corporate website] in May 2010 for allegedly “siphoning” off billions of dollars [JURIST report] in “critically-needed” assets days before the investment bank filed for a record-breaking bankruptcy. Former Lehman Brothers Chairman and Chief Executive Officer Richard Fuld, a defendant in the investors’ lawsuit, called for a new regulatory scheme [JURIST report] for financial firms during testimony before the US House Committee on Oversight and Government Reform [committee website] in October 2008. Fuld answered questions regarding Lehman Brother’s role in the financial crisis and the the high levels of executive compensation at the firm in the run-up to its Chapter 11 bankruptcy filing [bankruptcy petition, PDF; affidavit, PDF] and disputed lawmakers’ suggestions that Lehman Brothers managers defrauded investors by making public statements at odds with Lehman’s internal financial health.
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