Securities Fraud Lawsuit Against UBS Securities LLC by Detroit Pension Funds Won’t Be Remanded to State Court, Says District Court

The U.S. District Court for the Eastern District of Michigan says it won’t be remanding the securities fraud lawsuit accusing UBS Securities LLC and related entities of inducing two Detroit pension plans into taking an equity position in a collateralized loan obligation and then breaching their fiduciary duties through the improper liquidation of the securities. As a result of the alleged defrauding, the Detroit Police and Fire Retirement System of Detroit and the Detroit General Retirement System, also known together as the “Systems,” claim they were deprived of their $40 million investment.

The securities fraud lawsuit, which seeks rescission of contracts and damages, alleges violations of the Michigan Uniform Securities Act and numerous Michigan statutory and common law wrongs. The plaintiffs contend that the $20 billion in CLOs that UBS had obtained through subsidiary Dillon Read Capital Management had deteriorated so badly by May 2007 that UBS sought to unload them. They claim that the broker-dealer not only misrepresented the risks involved with CLOs and its ability to control them, but also, the misrepresentations were part of a scam to get rid of the loans.

While the defendants sought to remove the action to federal district court on the grounds of diversity jurisdiction, the plaintiffs wanted to remand the case to state court. They argued that diversity jurisdiction was lacking. The court, however, refused to send the securities lawsuit back.

Related Web Resource:
General Retirement System of the City of Detroit vs. UBS AG

Finance, City of Detroit

Securities Fraud Attorneys

UBS, Institutional Investors Securities Blog

Throughout the US, our institutional securities fraud lawyers represent clients who have suffered financial losses because of broker-dealer negligence. Contact Shepherd Smith Edwards & Kantas LTD LLP today.

Securities Fraud Lawsuit Against Citigroup Involving Mortgage-Related Risk Results in Mixed Ruling

According to a district court ruling, investors can proceed with certain securities fraud charges against Citigroup and a number of its directors over the alleged misrepresenting of the risks involved in mortgage-related investments (including auction-rate securities, collateralized debt obligations, Alt-A residential mortgage-backed securities, and structured investment vehicles). However, the majority of claims involving pleading inadequacies have been dismissed. The securities lawsuit seeks to represent persons that bought Citigroup common stock between January 2004 and January 15, 2009.

Current and ex-Citigroup shareholders have said that as a result of the securities fraud, which involved the misrepresentation of the risks involved via exposure to collateralized debt obligations, they ended up paying an inflated stock price. The plaintiffs are accusing several of the defendants of selling significant amounts of Citigroup stock during the class period. They also say that seven of the individual defendants certified the accuracy of certain Securities and Exchange Commission filings that were allegedly fraudulent. They plaintiffs are claiming that there were SEC filings that violated accounting rules because of the failure to report CDO exposure and value such holdings with accuracy.

The plaintiffs claim that the defendants intentionally hid the fact that billions of dollars in CDOs hadn’t been bought. They also said that defendants made misleading statements that did not properly make clear the subprime risks linked to the Citigroup CDO portfolio.

The defendants submitted a dismissal motion, which the court granted for the most part. Although the court is letting certain CDO-related claims to move forward, it agrees with the defense that because the plaintiffs failed to raise an inference of scienter before February 2007 (when the investment bank started buying insurance for its most high risk CDO holdings), the claims for that period cannot be maintained. The court also held that the plaintiffs failed to plead that seven of the individual defendants had been aware of Citigroup’s CDO operations. As a result, the court determined that there can be no finding of scienter in regards to the individuals.

The court, however, did that the plaintiffs adequately pleaded securities fraud claims against Citigroup, Gary Crittenden, Charles Prince, Thomas Maheras, Robert Druskin, David C. Bushnell, Michael Stuart Klein, and Robert Rubin for misstatements made about the bank’s CDO exposure between February and November 3, 2007. The plaintiffs also adequately pleaded securities fraud claims against Citigroup and Crittenden for Nov. 4, 2007, to April 2008 period.

Related Web Resource:
Citigroup Inc. Securities Litigation (PDF)

Continue Reading ›

Contact Information