Recent Zwerling Schachter Filings
On June 24, 2008, Judge Laura Taylor Swain of the United States District Court for the Southern District of New York issued an order appointing Dr. Michael A. Passidomo lead plaintiff in the class action pending against Citigroup Inc. (NYSE: C), Citigroup Global Markets, Inc. and Smith Barney (the “Defendants”) on behalf of investors in auction rate securities purchased from Defendants. Judge Swain appointed Zwerling, Schachter & Zwerling, LLP (“Zwerling Schachter”) to serve as Lead Counsel for the proposed class.
The first of the lawsuits involving the purchase of auction rate securities from Defendants was filed in March 2008. The suits, which were consolidated by the Court, allege that since April 2002 Defendants deceived investors about the risks of auction rate securities by, among other things, falsely marketing auction rate securities as cash equivalents that were highly safe and liquid investments. However, as alleged in the complaints, auction rate securities are complex financial instruments that only appeared liquid and stable because Defendants were artificially supporting and manipulating the market. The auction rate securities market collapsed on February 13, 2008 after Defendants withdrew their support, rendering investors’ auction rate securities illiquid and worth substantially less than par value.
Lead Plaintiff filed a consolidated amended complaint alleging that during the period from August 1, 2007 through February 11, 2008, the Defendants engaged in market manipulation of the auction rate securities underwritten or sold by them at Citigroup managed auctions (“Citigroup ARS”). The Court dismissed the consolidated amended complaint without prejudice, giving Lead Plaintiff an opportunity to amend. Lead Plaintiff filed the Second Consolidated Amended Complaint detailing the Defendants’ market manipulation based upon, among other things, regulatory complaints filed by the New York Attorney General (“NY AG”) and the Securities and Exchange Commission (“SEC”), quoting Defendants’ internal documents. Defendants have moved to dismiss that second consolidated amended complaint in part on the ground that by virtue of regulatory settlements with the SEC and the NY AG, Lead Plaintiff has no damages. Two other investors have since joined the Lead Plaintiff in prosecution this action: a purchaser of Citigroup ARS from non-Defendant-related brokerage firm in Citigroup managed auctions (known as a “downstream purchaser” in the Third Consolidated Amended Complaint), and an institutional investor who se purchases of Citigroup ARS were not redeemed through the regulatory settlement (as described in the Fourth Consolidated Amended Complaint).
Zwerling Schachter filed a securities class action lawsuit in the United States District Court for the Southern District of New York against UBS Financial Services, Inc., a subsidiary of Zurich, Switzerland-based UBS AG (NYSE: UBS), as well as officers and directors of Lehman Brothers, based on financial losses suffered by investors who bought securities known as principal protection notes. The class action is brought on behalf of all persons and entities who, from May 30, 2006 until September 15, 2008, purchased unsecured obligations known as 100% Principal Protection Notes that were issued pursuant to Lehman's Form S-3 Registration Statement, dated May 30, 2006 and Medium-Term Notes, Series I Prospectus Supplement, dated May 30, 2006, and underwritten and sold by UBS and others, and who were damaged thereby.
Lehman Brothers issued the notes in question with UBS and Lehman serving as the underwriters and sellers. Principal protection notes purportedly provide investors with protection for some or all of the principal they invest as well as a potential for a return based on the performance of the underlying investment. But note-holders' investments effectively vanished in September 2008 when Lehman Brothers defaulted on the notes by filing the largest bankruptcy in U.S. history. The complaint alleges that Lehman Brothers promised investors a complete return of principal even while the company knew its own financial situation was precarious. Lehman Brothers was maintaining inflated commercial and residential mortgage and real estate assets in addition to large amounts of leverage, and failed to take steps to lower its exposure to the weakening credit and mortgage markets or explain such risks to investors.
Zwerling Schachter represents investors in so-called feeder funds which in turn invested money with Bernard L. Madoff Investment Securities LLC. Specifically, Zwerling Schachter represents investors in Fairfiled Sentry Limited ("Fairfield Sentry") and Optimal SUS. Fairfiled Sentry was controlled by Fairfiled Greenwich Group and Optimal SUS was controlled by Banco Santander. These separate class action lawsuits arise out of the largest and longest running "Ponzi" scheme in history - a fraud orchestrated by Bernard Madoff, and facilitated by the reckless grossly negligent, and fraudulent conduct of others (including the defendants named by Zwerling Schachter in their clients' lawsuits), that cost investors many billions of dollars. Plaintiffs and class members in these actions are all shareholders and/or equity holders in Fairfiled Sentry and/or Optimal SUS.
Zwerling Schachter represents the Wayne County Employees’ Retirement System in securities class actions filed against Massey Energy Company (“Massey” or “the Company”), one of the largest coal mining companies in West Virginia and Central Appalachia, and certain of the Company’s officers and directors. The actions, pending in the United States District Court for the Southern District of West Virginia, assert claims on behalf of Massey investors under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated there under, and allege that Massey misrepresented to the public its safety record and its commitment to the safety of its operations. After the April 5, 2010 explosion at Massey’s Upper Big Branch mine in West Virginia, the deadliest mining accident in the United States in nearly 40 years, the public learned of scores of undisclosed and uncorrected safety violations at Massey’s mines and of the Company’s disregard for safety in favor of generating profits.
Zwerling Schachter filed a securities class action lawsuit in the United States District Court for the Central District of California against Securities America, Inc., Ameriprise Financial, Inc. and Securities America Financial Corporation. The class action is brought on behalf of all persons or entities who purchased or otherwise acquired promissory notes issued by Medical Capital Holdings, Inc.'s special purpose corporations ("Medical Capital"), Medical Provider Financial Corporation III, Medical Provider Financial Corporation IV, Medical Provider Funding Corporation V, and/or Medical Provider Funding Corporation VI (the "Notes") on or after September 18, 2006 and were damaged thereby. The complaint alleges that defendants violated Sections 12(a)(1), 12(a)(2) and 15 of the Securities Act of 1933. Specifically, the complaint claims that defendants failed to adequately perform due diligence in connection with the sale of the Notes, and that defendants sold non-exempt securities that were not registered with the Securities and Exchange Commission. Additionally, the complaint alleges that the private placement memoranda for the Notes contained materially false and misleading statements. In August 2009, the public learned that Medical Capital was a fraud, and that investor funds had been misappropriated and wrongfully used.
On December 9, 2009, Zwerling Schachter was appointed co-lead counsel in the action.
Zwerling Schachter filed a class action in the United States District Court for the Northern District of Texas (Dallas Division) on behalf of all persons and entities who, from September 1, 2006 until January 31, 2009, purchased or acquired partnership interests, preferred stock, or other securities in one or more of certain affiliates of Provident Royalties LLC ("Provident"), including corporations designated as "Provident Royalties" or "Shale Royalties", through a series of 21 private placement offerings (the "Offerings"). The securities were sold by defendants NEXT Financial Group, Inc., QA3 Financial Corp., and Securities America, Inc., among others. Investors were promised a high rate of return and told that their funds would be invested in the oil and gas business, including acquiring real estate, oil and gas leases and mineral interests, and conducting exploration and development activities. The complaint alleges that investors were not told, among other things, that their funds were commingled with funds received from other investors in connection with other Offerings and that later investors' funds were used to pay "dividends" and "returns of capital" to earlier investors in the Provident companies.
On November 6, 2009, Zwerling Schachter was appointed interim co-lead counsel on behalf of the class.