Following months of giant bank and broker/dealer write-downs, losses, CEO expulsions, runs on banks, and the pummeling of shareholder value at many of the world’s largest banks and brokerages, now come the lawsuits, and even word of criminal investigations. There seems to be something to directly or indirectly affect everyone: ERISA litigation attorneys Keller Rohrback filed a class action against Merrill Lynch November 29 on behalf of the firm’s 401(k) Savings and Investment Plan and Employee Stock Ownership Plan, alleging that the firm “allowed heavy, imprudent investment of the Plans’ assets in Merrill Lynch common stock throughout the class period even though they knew or should have known that such investment was clearly risky and imprudent,” citing the firm’s foray into the CDO markets, according to the complaint. Citigroup faces a similar case, filed December 13, and the law firm is investigating whether to proceed with an action against Morgan Stanley, it announced January 4. Two other shareholder suits were filed against Merrill Lynch, on October 30, and December 4, both alleging that the company made “materially false and misleading statements regarding the company’s business and financial results,” related to the CDO and mortgage backed situation.
Coughlin Stoia Geller Rudman & Robbins, LLP announced a shareholder class action against UBS December 13, alleging that UBS made statements about its business results that were “materially false and misleading because they failed to disclose the Company’s failure to timely write-down impaired securities containing subprime debt.”
Meanwhile, there is the potential for escalation of Bear Stearns’s woes into a criminal investigation. The firm’s CEO, James Cayne departed on January 8, replaced by Alan Schwartz, who has been president, though Cayne retains the chairman title. Bear Stearns Asset Management was sued for fraud by Barclays Bank PLC December 19, by investors Samuel T. Cohen, November 19, and FIC, LP on December 21. A December 17 Business Week article reported that the Brooklyn U.S. Attorney’s Office and the SEC are investigating whether insiders may have redeemed shares in a hedge fund–which was managed by Bear Stearns Asset Management, and which later collapsed because of its leveraged investments in CDOs–while “the funds’ managers were urging other investors to stay put.”