Third Amended Complaint - Lehman Brothers Securities Litigation

More documents

Recommendations

Info

iii.The PPNs did not offer “principal protection,” and were actually no differentfrom traditional bonds.b. PPN pricing supplements disseminated before October 2007 identified anumber of “Key Risks,” but failed to state that investors were lending money to Lehman anddepended on Lehman’s solvency for repayment of their principal. The omission of any disclosure ineach of these pricing supplements that investors were dependent on Lehman’s ability to repay theprincipal rendered each pricing supplement misleading.c. PPN pricing supplements disseminated in or after October 2007 identified anumber of “Key Risks,” including a statement that the investments were subject to Lehman’s “creditrisk” (or “creditworthiness”) and that Lehman’s creditworthiness “may affect the market value ofthe Notes.” Only two of the PPN pricing supplements, with settlement dates of May 12, 2008 andJune 30, 2008, included the additional statement that “The Notes are debt securities that are directobligations of Lehman Brothers Holdings Inc.” Under all of the relevant circumstances, includingLehman’s financial condition and business strategy at all relevant times (as alleged in 26-108),the Key Risk disclosure that an investment in the PPNs was subject to Lehman’s credit risk orLehman’s creditworthiness was not sufficiently specific, prominent or complete, or conveyed withsufficient intensity and proximity, to counteract the misleading impression created by the repeatedreferences to principal protection.d. For the reasons alleged in 26-108, including Lehman’s change in businessstrategy from “moving” to “storage,” Lehman’s business strategy of accumulating illiquid, high riskassets in the face of a deteriorating economy, Lehman’s business strategy of disregarding its ownrisk management policies, as well as Lehman’s manipulation of its balance sheet to disguise itsactual leverage ratios, the PPNs were incapable of providing full or partial principal protection,whether or not held to maturity, and were not suitable for persons who sought full or partialprincipal protection.-40-
119. After Lehman’s bankruptcy, in response to questions from UBS financial advisorsand their clients who had purchased Lehman/UBS Structured Products, UBS issued a 3-page“Structured Products Lehman Q&A.” In this September 23, 2008 document, UBS informedinvestors that they had no interest in any instruments used by Lehman to hedge its obligations underthe PPNs, that the PPNs were not supported by any security interest or collateral, that investorswould not receive principal protection, and that the PPNs were no different from traditional bonds.VI.CAUSES OF ACTION UNDER THE SECURITIES ACTCOUNT IViolations Of Section 11 Of The SecuritiesAct Against The Securities Act Defendants120. Plaintiffs repeat and reallege each and every allegation contained above as if set forthfully herein and further allege as follows. This Count is based on negligence and strict liability anddoes not sound in fraud. Any allegations of fraud or fraudulent conduct and/or motive arespecifically excluded from this Count.121. This Count is asserted against Defendants Fuld, O’Meara, Callan, the DirectorDefendants, E&Y, and the Underwriter Defendants (together, the “Securities Act Defendants”) forviolations of Section 11 of the Securities Act, 15 U.S.C. § 77k, on behalf of Plaintiffs and allmembers of the Class who purchased or otherwise acquired the Lehman securities set forth inAppendices A and B pursuant or traceable to the materially false and misleading Shelf RegistrationStatement and Offering Materials incorporated by reference in the Shelf Registration Statement.122. The Shelf Registration Statement, including the Offering Materials and StructuredNote Offering Materials incorporated by reference therein at the time of each Offering, containeduntrue statements of material fact and omitted to state other material facts necessary to make thestatements made therein not misleading. The specific documents containing such untrue statementsand omissions that were incorporated by reference in the Shelf Registration Statement with regardto each Offering and Structured Note Offering are identified in Appendices A and B.-41-
Page 2 and 3: TABLE OF CONTENTSI. NATURE OF ACTIO
Page 4 and 5: COUNT VI Violations Of Section 20A
Page 6 and 7: CEO:CFO:CLO:CMBS:Commercial Portfol
Page 8 and 9: SFAS 133:SFAS 140:SFAS 157:Financia
Page 10 and 11: disclose that (i) it simultaneously
Page 12 and 13: C. Defendants8. At all relevant tim
Page 14 and 15: can only be ascertained through app
Page 16 and 17: A. The Offering Materials Were Mate
Page 18 and 19: 105 transactions, “[c]onsequently
Page 20 and 21: Table 3 - Repo 105 Transactions and
Page 22 and 23: financial condition and operations
Page 24 and 25: were temporarily removed from Lehma
Page 27 and 28: purpose to the transactions. Indeed
Page 29 and 30: management policies and systems ena
Page 31 and 32: 76. Indeed, in order to engage in r
Page 33 and 34: Lehman’s stress tests “meaningl
Page 35 and 36: 3. The Offering Materials Contained
Page 37 and 38: with regard to Level 3 inputs, SFAS
Page 39 and 40: and other boom markets, focused on
Page 41 and 42: specifically carved out “all [of
Page 43 and 44: Lehman had already committed to fin
Page 45 and 46: derivative component of the investm
Page 47: generally accepted accounting princ
Page 51 and 52: misleading. The Securities Act Defe
Page 53 and 54: 138. Plaintiffs and other members o
Page 55 and 56: A. Repo 105 Transactions1. Lehman U
Page 57 and 58: our governments businesses around t
Page 59 and 60: 154. As the Examiner stated with re
Page 61 and 62: 162. The Insider Defendants knew an
Page 63 and 64: 169. Rather than disclose to the in
Page 65 and 66: setting of risk limits.” These st
Page 67 and 68: exceeded its risk appetite limits b
Page 69 and 70: most part that are in-the-money”
Page 71 and 72: y the Company on June 9, Callan sta
Page 73 and 74: 198. The 2Q08 10-Q reported that th
Page 75 and 76: cover lending positions. Jane Buyer
Page 77 and 78: upon their conversation, McDade und
Page 79 and 80: (e) Lehman was motivated to manage
Page 81 and 82: c. On July 20, 2007, Nagioff emaile
Page 83 and 84: sell assets, and that the distresse
Page 85 and 86: accordance with the standards of th
Page 87 and 88: E&Y’s contemporaneous notes demon
Page 89 and 90: obligations when auditing and revie
Page 91 and 92: 240. AU §§ 336 and 9336 address a
Page 93 and 94: A delinquencies and loss expectatio
Page 95 and 96: on behalf of Plaintiffs and other m
Page 97 and 98: involvement in the day-to-day opera
Page 99:
(b)(c)(d)(e)(f)Awarding Plaintiffs
Page 177 and 178:
APPENDIX ACOMMON STOCK/PREFERRED ST
Page 179 and 180:
APPENDIX AISSUE DATEApril 4, 2008(t
Page 181 and 182:
APPENDIX AISSUE DATEAugust 1, 2007A
Page 183 and 184:
APPENDIX AISSUE DATEDecember 21,200
Page 185 and 186:
APPENDIX AISSUE DATEFebruary 27,200
Page 187 and 188:
APPENDIX AISSUE DATEMay 9, 2008May
Page 189 and 190:
APPENDIX B
Page 191 and 192:
APPENDIX BISSUE DATESECURITY(CUSIP)
Page 193 and 194:
Page 195 and 196:
Page 197 and 198:
Page 199 and 200:
Page 201 and 202:
Page 203 and 204:
Page 205 and 206:
Page 207 and 208:
Page 209 and 210:
Page 211 and 212:
APPENDIX C1. CW1, an underwriter in
Page 213 and 214:
7. CW7 and CW8, investigators in Au
show all

Third Amended Complaint - Lehman Brothers Securities Litigation

Create successful ePaper yourself

Delete template?

Save as template?