CalPERS sues Wall Street's top investment banks

[notesdev]

CalPERS is suing many of Wall Street's top investment banks, seeking to recover hundreds of millions of dollars it lost in the Lehman Brothers bankruptcy.

The lawsuit targets 34 firms, including such big names as Citigroup, Bank of New York Mellon and Wells Fargo Securities. They were the underwriters, the firms that sold Lehman securities to investors such as CalPERS.

The suit, filed late Monday in U.S. District Court in San Francisco, also names Lehman's top officers and directors, including former Chairman and Chief Executive Richard Fuld.

CalPERS says in the suit that it was victimized by a "fraudulent scheme" that hid Lehman's high-risk mortgage dealings from investors. When those mortgages went sour, Lehman collapsed, the suit says.

...

http://www.sacbee.com/2011/02/09/3387704/calpers-sues-wall-streets-top.html

[xchrom]

1. calpers may wind up being a real hero in this story.

disclosure could be really interesting.

[FreakinDJ]

2. Some has to since the Federal Gov won't

[ProgressiveProfessor]

3. We shall see...its not like CalPERS was some small investor without their own resources

The law in this area is strongly in the camp of the broker. CalPERS has been making its own investment decisions in house for years and has been known to throw it weight around in an effort to get sweetheart deals. It also has a long track record of forecasting excessively high returns to maintain its actuarial soundness. While I am sending money weekly to CalPERS, I do not expect they have a serious chance of prevailing.

[elleng]

6. Don't understand.

How would 'forecasting excessively high returns ( ) maintain its actuarial soundness?'

[ProgressiveProfessor]

10. It doesn't but CalPERS seems to get away with it.

[notesdev]

12. It's a convenient fiction for everyone

that way when the inevitable bailout or cuts come they will be under the guise of being unexpected events that no one can blame a politician for

[FreakinDJ]

8. If CalPERs proves they "Knowingly Withheld" information

its "Game and Match"

Simple as tracking the dates they took out CDS's on the securities and the reasons why. Also remember in CIVIL Court there is lesser degree for burden of proof

[ProgressiveProfessor]

11. Deck is still heavily stacked against the investor

There would also have to be a fiduciary duty and its not clear that they had one with CalPERS.

[DBoon]

4. This is why the right hates pensions

Combined political clout.

A bunch of individual workers with individual IRA/401(k) accounts would never have this levereage

[damntexdem]

5. Go, go, CalPERS!

And meanwhile, keep those pension checks coming.

[shanti]

13. thankyouverymuch!

:hi:

[seafan]

7. Maybe one of the defendants is Jeb Bush.

CalPERS Sues Ex-Lehman Execs & Underwriters, Alleging a 'Fraudulent Scheme'

February 08, 2011

(February 8, 2011) -- The California Public Employees’ Retirement System (CalPERS) has sued former Lehman Brothers Holdings Inc. executives and underwriters, alleging that they concealed Lehman’s exposure to subprime loans.

CalPERS, the largest US public pension fund, said in a complaint filed in San Francisco federal court that the executives of 34 investment banks -- including Citigroup, Wells Fargo Securities and Bank of New York Mellon -- made misleading statements in offering documents for bonds issued from June 2007 to September 2008.

"Lehman's executives…made materially false statements about its financial condition causing Lehman's stock and bond prices to be artificially inflated," the suit stated. "When Lehman's losses and exposure came to light, the revelations led to severe declines in Lehman's stock price and ultimately to its bankruptcy. Lehman also had engaged in manipulative quarter-end transactions called "REPO 105" transactions that hid billions of dollars of Lehman's debt from the public," the lawsuit asserting, referring to the accounting practice that allegedly allowed Lehman to hide the extent of its use of borrowed money, or leverage.

.....

Pensions have been aggressively suing financial institutions in the wake of huge losses during the economic downturn. In April last year, records released to US Rep. Mary Jo Kilroy of Columbus, Ohio, showed the state's public pension funds took a $480 million hit to investments in the wake of the collapse of banking giant Lehman. The state of Oregon sued former financial giant Bear Stearns, alleging the company issued misleading information about securities. The state attorney alleged that the losses at Bear Stearns -- accused of exaggerating the value and quality of the securities they sold -- are directly attributable to misleading filings in connection with mortgage-backed securities. "We believe that these junk investments were intentionally mislabeled, and all Oregonians are still reeling from the economic fallout," Oregon Treasurer Ted Wheeler said in a statement obtained by the Wall Street Journal. "If you hurt Oregonians financially, we are coming after you."

.....

Floridians would like to get some of their pension funds back from Lehman as well.


Jeb Bush is already the lead defendant in a lawsuit brought against him and other board members by Tenet shareholders.



Don't get too comfortable sucking at that trough, Mr. Bush.

[DCKit]

9. I hope this suit doesn't evaporate like the 50 state AG suit against the mortgage industry.

But this isn't a group that depends on corporate money to get elected, either.

Between this and the still off-the-books mortgage liabilities, even the biggest of these corps are insolvent, yet they're still paying record bonuses. Talk about voodoo economics.