Third Amended Complaint - Lehman Brothers Securities Litigation

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SFAS 133:SFAS 140:SFAS 157:Financial Accounting Standards Board – Statement of FinancialAccounting Standards No. 133, Accounting for Derivative Instrumentsand Hedging Activities.Financial Accounting Standards Board – Statement of FinancialAccounting Standards No. 140, Accounting for Transfers and Servicingof Financial Assets and Extinguishments of Liabilities.Financial Accounting Standards Board – Statement of FinancialAccounting Standards No. 157, Fair Value Measurement.Single Transaction Limit: A limit designed to ensure that Lehman did not commit too much risk ina single transaction.SOP 94-06:Stress tests:VaR:AICPA Statement of Position No. 94-6, Disclosure of CertainSignificant Risks and Uncertainties.Analyses employed to evaluate how various market scenarios wouldaffect its portfolio.Value at Risk, which measures the potential loss in the fair value of aportfolio.-vii-
Plaintiffs bring claims arising under the Securities Act individually and on behalf of allpersons and entities, except Defendants and their affiliates, who purchased or otherwise acquiredthe Lehman Brothers Holdings Inc. (“Lehman” or the “Company”) securities identified inAppendices A and B attached hereto and who were damaged thereby. 1Separately, Plaintiffs bringclaims arising under the Exchange Act individually and on behalf of all persons and entities, exceptDefendants and their affiliates, who purchased or otherwise acquired Lehman common stock, calloptions, and/or who sold put options between June 12, 2007 and September 15, 2008, inclusive (the“Class Period”), and who were damaged thereby.Plaintiffs’ allegations are based upon personal knowledge as to themselves and their actions,and upon lead counsel’s investigation as to all other matters. Such investigation included interviewsof Confidential Witnesses (“CWs”), review of press releases, analyst reports, media reports,conference call transcripts, documents and testimony provided to Congress, SEC filings, books, andthe March 11, 2010 report and documents collected by the Bankruptcy Court-appointed examiner,Anton R. Valukas (the “Examiner”).I. NATURE OF ACTION1. As alleged herein, the Offering Materials contained untrue statements and omittedmaterials facts concerning the following aspects of Lehman’s financial results and operation, whichallowed Lehman to raise over $31 billion through the Offerings set forth on Appendices A and B:Repo 105: Lehman used undisclosed repurchase and resale (“repo”) transactions,known as “Repo 105” and “Repo 108” transactions (together, “Repo 105”), totemporarily remove tens of billions of dollars from its balance sheet at the end offinancial reporting periods, usually for a period of seven to ten days. Thesetransactions lacked any economic substance. While Lehman affirmativelyrepresented throughout the Class Period that it used ordinary repo agreements andrecorded these repos as short-term financings, i.e., borrowings, Lehman failed to1“Offerings” refers to the offerings set forth on Appendices A and B that occurred pursuant to ashelf registration statement dated May 30, 2006, filed with the SEC on Form S-3 (the “ShelfRegistration Statement”). The Shelf Registration Statement, together with the prospectuses,prospectus supplements, product supplements and pricing supplements, as well as all SEC filingsincorporated therein, are collectively referred to herein as the “Offering Materials.”-1-
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 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 and 48: generally accepted accounting princ
Page 49 and 50: 119. After Lehman’s bankruptcy, i
Page 51 and 52: misleading. The Securities Act Defe
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Page 55 and 56: A. Repo 105 Transactions1. Lehman U
Page 57 and 58: our governments businesses around t
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154. As the Examiner stated with re
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162. The Insider Defendants knew an
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169. Rather than disclose to the in
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setting of risk limits.” These st
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exceeded its risk appetite limits b
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most part that are in-the-money”
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y the Company on June 9, Callan sta
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198. The 2Q08 10-Q reported that th
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cover lending positions. Jane Buyer
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upon their conversation, McDade und
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(e) Lehman was motivated to manage
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c. On July 20, 2007, Nagioff emaile
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sell assets, and that the distresse
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accordance with the standards of th
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E&Y’s contemporaneous notes demon
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obligations when auditing and revie
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240. AU §§ 336 and 9336 address a
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A delinquencies and loss expectatio
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on behalf of Plaintiffs and other m
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involvement in the day-to-day opera
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(b)(c)(d)(e)(f)Awarding Plaintiffs
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APPENDIX ACOMMON STOCK/PREFERRED ST
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APPENDIX AISSUE DATEApril 4, 2008(t
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APPENDIX AISSUE DATEAugust 1, 2007A
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APPENDIX AISSUE DATEDecember 21,200
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APPENDIX AISSUE DATEFebruary 27,200
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APPENDIX AISSUE DATEMay 9, 2008May
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APPENDIX B
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APPENDIX BISSUE DATESECURITY(CUSIP)
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APPENDIX C1. CW1, an underwriter in
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7. CW7 and CW8, investigators in Au
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Third Amended Complaint - Lehman Brothers Securities Litigation

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