Lehman Notes - Structured Products, Lehman Brothers Principal Protected Notes, Lehman Backed Bonds, Lehman Brothers Bankruptcy

Vernon Healy law firm files claim for more than $900,000 against UBS on behalf of charitable trust that invested in Lehman notes that UBS marketed as safe and “principal protected” investments

Naples, Fla. — UBS engaged in gross misconduct when it marketed more than $900,000 in Lehman notes to a charitable trust as a safe and “principal protected” investment after public warning signs about Lehman Brothers’ financial solvency had surfaced, according to a claim filed today by the Vernon Healy law firm. 

The charitable trust, which gives to environmental causes, the arts and youth programs, stands to lose more than a $1 million on Lehman notes and other structured products sold to it by UBS. 

According to the UBS sales pitch, principal protected notes would return the entire original principal investment back to the investor even under a worst case scenario.  However, the notes were in fact risky, unsecured loans to Lehman Brothers, according to the claim. 

When an issuer goes bankrupt, as Lehman Brothers did, holders of structured notes are left standing at the back of the line with other unsecured creditors and they may recover little, if anything, of their original investment.

Structured products, including principal protected notes, were initially sold only to institutional investors.  More recently, major brokerage firms, including UBS (UBS), Merrill Lynch (MER), Barclays (BCS) and Wachovia (WB), have pushed their sales forces to dump these products on their own retail customers, said securities attorney Chris Vernon.

As early as 2005, industry regulators from the Financial Industry Regulatory Authority (formerly known as the NASD) raised concerns about the way that complex structured products, including structured notes, were being marketed to individual investors.  At least one European country has outlawed the recommendation of structured products to retail investors.

In the case of the charitable trust, the UBS investment advisor urged the purchase of Lehman notes in February and March, 2008, after significant concerns about Lehman’s creditworthiness surfaced within the investment world that UBS operates, according to the claim.

In fact, UBS sold the trust more than $600,000 in Lehman notes after the collapse of Bear Sterns and Lehman’s 2008 first quarter report raised concerns in the financial industry about its balance sheet.  As investment professionals, UBS was well aware, or should have been well aware, that credit risk was an issue when it sold the Lehman notes, the claim asserts.   

The Vernon Healy law firm is helping multiple Lehman structured note investors weigh their legal options, which include filing individual or group arbitration claims with the Financial Industry Regulatory Authority (FINRA). 

Through formal claims, the Vernon Healy law firm intends to show that conflicts of interest led UBS to misrepresent and inappropriately recommend Lehman notes and other structured notes to a wide variety of its trusting base of retail clients.

Vernon Healy is a Naples, Florida based law firm that assists investors nationwide in recovering significant losses caused by all manner of financial fraud and negligence in both court and arbitration.

The firm handles a wide variety of business and investment related matters, including disputes involving various types of securities and investments — e.g., hedge funds, TICs (tenancy in common), bonds, variable pre-paid forward contracts,  mortgage and debt obligations, pension and retirement funds.
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For more information, contact:
Christopher T. Vernon, attorney at law
Susan R. Healy, attorney at law
http://www.vernonhealy.com
http://www.protectinginvestors.com
(239) 649-5390
Toll Free: (877) 649-5394
email: acostanzo@vernonhealy.com

Bankruptcy Information for Lehman Brothers Structured Products Investors

If you own Lehman Brothers structured products, the Bankruptcy Court makes it easy for you to file your claim in the Lehman bankruptcy proceedings.  You may file your own proof of claim, or have your attorney file a claim on your behalf, but you also have a convenient alternative.

Wilmington Trust Company will represent the interest of investors who own Lehman structured products — including Lehman Principal Protected Notes — by filing a global claim in the bankruptcy.  In order to participate, you just need to complete the one-page Trustee’s Mailing Matrix and send it to Wilmington Trust.  If you own Lehman structured products (sometimes referred to as Lehman notes), you should have already received your copy of the Trustee’s Mailing Matrix in the mail.  However, if you do not have your form, click on the link at the bottom of this article to download a copy. 

You will need the following information in order to complete the Matrix form: 

• The name of your broker or investment advisor

• A list of the products you own, including the amounts and the CUSIP numbers.  CUSIP (Committee on Uniform Securities Identification Procedures) numbers are unique identifying codes that are assigned to all securities.  CUSIP numbers for individual products can be found on trade confirmations, which are the notices you receive when you buy or sell a security. 

It is too early to know how much, if anything, Lehman notes and structured products investors will recover in the Lehman bankruptcy.  At this point, it is not even clear what priority structured notes and other structured products will be given.

Ordinarily, structured product holders should have the same priority as bond holders; however, the bankruptcy court could decide to treat structured product claims differently.  One reason for differentiating between bond holders and structured product holders is that while a value can be readily established for bonds, structured products had no established price prior to maturity.   

Vernon • Healy recommends that Lehman structured product holders pursue all their recovery options.  In addition to filing a bankruptcy claim, investors with small claims should consider participating in the class action (which means timely completing and returning the class action claim forms). 

Vernon • Healy represents investors with larger losses who will likely fare better by pursuing their claims on an individual basis, as opposed to participating in the class action.  Click here to read more about Vernon • Healy’s efforts on behalf of individual investors with larger claims and click here to read more about the firm.   

Click here to download the Trustee’s Mailing Matrix.Download Matrix

Brokerage Firms like UBS who sold clients Lehman Principal Protected Notes appear to have ignored Lehman Brothers warning signs

Warning signs that Lehman Brothers faced serious trouble became evident within the financial industry prior to the summer of 2007.

That assessment is based on the work of Jim Kaplan, of the company Audit Integrity, a firm that offers “forensic analysis” research.

An acceleration of receivables at Lehman beginning in summer 2006 marked the first warning sign, according to Kaplan.  In February 2007, Lehman announced a repurchase of approximately one fifth of its shares outstanding — or 100 million shares. By May 2007, key insiders had begun to dump 60 million shares, Kaplan reports.

With those warning signs evident in 2007, the $2.8 billion in Lehman “Principal Protected” Notes sold to investors in 2008 is nothing short of astounding.

To put this $2.8 billion of potentially lost principal into perspective, consider the purchasing power in the economy that it represents: $2.8 billion could pay for 14,000 homes that cost $200,000 each. It could pay for 140,000 Toyota Camrys. It could buy $100 worth of groceries for 28 million families. 

Principal Protected Notes are one type of so-called structured product that brokerage firms have hawked to investors in recent years. 

On its face, the name “Principal Protected Note” suggests that an investors’ principal is protected. There’s nothing vague about the name.

So it’s no wonder that investors now find themselves dumbfounded that they can’t get back the principal investment they thought was secure.

With Lehman insolvent, investors who want their principal back now find themselves at the back of the line in bankruptcy court as Lehman’s unsecured creditors.  

UBS and others misrepresented these and other complex products to investors even though industry regulators put brokers on notice as early as 2005 to make sure that they accurately described the complexities and associated risks of structured products.

At Vernon Healy, we’re investigating misconduct on the part of major brokerage firms including UBS (UBS), Merrill Lynch (MER), Barclays (BCS) and Wachovia (WB) —particularly their failed due diligence in vetting these products or ignoring or concealing the results of any due diligence they did. We’re examining misrepresentations and omissions made by these firms about the true state of affairs at Lehman and the safety and efficacy of these products and the conflicts of interests that drove brokerage firms to dump these products on their retail customers.

Our investigation has revealed that brokerage firms, particularly UBS, continued to hawk Lehman Principal Protected Notes even after the March 2008 collapse of Bear Sterns sent shock waves up and down Wall Street and raised questions about financial firms’ ability to repay their loans.

UBS, it appears, had a vested interest in propping Lehman up with Principal Protected Notes — or loans —from its retail clients: On the day that Lehman collapsed, UBS issued a statement saying it had “no more” than $300 million in Lehman holdings.

UBS retail customers who purchased Lehman Principal Protected Notes appear to be the ones paying for UBS’ conflict of interest.