UBS To Pay $120 Million To Settle Claims Over Lehman Brothers Securities Losses

NEW YORK — (Mealey’s) In a New York federal court, UBS Financial Services Inc. agreed on Aug 8 to pay $120 million to settle federal securities law claims that it misrepresented the investment quality of certain Lehman Brothers securities it sold before Lehman Brothers filed for bankruptcy in 2008 (In re:  Lehman Brothers Securities and ERISA Litigation, MDL No. 09-2017 [In re:  Lehman Brothers Equity/Debt Securities Litigation, No. 08-5523], S.D. N.Y.).

The settlement deals only with the structured products class, and modifies U.S. Judge Lewis A. Kaplan of the Southern District of New York’s Jan. 23 class certification ruling to include “all 84 offerings of Lehman Structured Products sold by” UBS.  It is subject to court approval.

Shareholders filed an amended complaint in the District Court on behalf of two classes of shareholders.  The first class sought relief from Ernst & Young LLP (E&Y) for its alleged violation of Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5 in connection with Lehman Brothers’ second-quarter 2008 Form 10-Q.  The second class, the structured products claims, sought relief from UBS for its alleged violation of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 in underwriting 31 structured note offerings from April 30, 2007, through June 30, 2008.

Classes Certified

In a Jan. 23 ruling, Judge Lewis A. Kaplan certified both classes, and the parties engaged in settlement discussions.

Lehman’s September 2008 bankruptcy is the largest in U.S. history.  In the multidistrict litigation, Lehman Brothers securities investors brought fraud claims against the company’s directors, officers, stock issuance underwriters and accountants, alleging that the defendants misled the investing public about Lehman Brothers’ risk-management policies, leverage and real estate holdings before Lehman Brothers failed.

The plaintiffs are represented by Max W. Berger and Steven B. Singer of Bernstein Litowitz Berger & Grossman in New York, David R. Stickney, Benjamin Galdston, Brett M. Middleton and Laurence R. Wrathall of Bernstein Litowitz in San Diego and David Kessler and Jennifer L. Enck of Kessler Topaz Meltzer and Check in Radnor, Pa.


E&Y is represented by Jamie Lynne Wine and Miles Norman Ruthberg in New York, Kevin H. Metz in Washington, D.C., and Peter A. Wald in San Francisco, all of Latham & Watkins.

UBS is represented by Marshall Ross King and Jonathan Cobb Dickey of Gibson, Dunn & Crutcher in New York.

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