Naples – UBS was negligent in its handling of a Naples surgery assistant’s retirement nest egg when brokers from the firm recommended risky investment products such as Lehman notes while failing to reveal the true level of credit risk, according to a claim filed today by the Vernon Healy Law Firm.
Despite being reassured by her broker at the UBS office in Bonita Springs that the principal of her investment was safe and, according to firm literature, the structured products were subject to “rigorous ongoing due diligence,” the 49-year-old hospital worker, lost almost $60,000 of her retirement savings. She ended up with a retirement account that consisted entirely of auction rate securities and structured products, including now virtually worthless Lehman Brothers structured notes, according to the claim.
The Lehman structured notes, a complex investment product designed by UBS, are difficult to understand but nonetheless were pushed to the client even though she instructed her UBS financial advisors to set extremely conservative goals and target principal protected investments.
Vernon Healy’s client did her best to protect herself from investments that might threaten her retirement nest egg and balked at initial recommendations from her UBS brokers that seemed too risky, according to the claim. Instead, she instructed her UBS broker to “park” her money until she decided a direction. The broker then recommended and bought the risky auction rate securities and structured notes.
UBS paid more than $22 billion in a December 2008 settlement to repurchase the auction rate securities from investors such as Vernon Healy’s client. But the firm remains responsible for its reckless advice that landed her with nearly $200,000 in risky structured products.
UBS is complicit in this grossly negligent advice and marketing to Vernon Healy’s client because it failed to warn brokers about the growing risk of structured products, the claim states. UBS strayed from its mission to put the investor’s needs above its own by failing to point out the riskiness of these investments.
The firm went so far as to hold trainings during which it encouraged brokers to aggressively market the structured products despite numerous red flags related to the credit crisis and the housing market meltdown. Despite these warning signs, UBS continued to promote and sell Lehman structured products to its customers, including Vernon Healy’s client.
The terms “principal protected” and “guaranteed return of principal” were used in the marketing of structured products because, when combined with the excessive complexity of the coupon payment formulas, they were effective at obscuring the substantial credit risk in the products. Because principal protected notes purported to guarantee principal, they were easy to market to investors seeking low risk investments, the claim states.
"Principal protection" means nothing if the note issuers are unable to meet their obligations. Structured product investors essentially made unsecured loans to different issuing banks, including the now bankrupt Lehman Brothers.
By late February 2008, when UBS sold Lehman structured notes to Vernon Healy’s client, UBS was well aware of the effect of the credit crisis on the financial sector in general and Lehman in particular, according to the claim.
Lehman’s 2007 fourth quarter earnings were down; the credit market crisis caused staggering total write-downs of $3.5 billion during the quarter with more write-downs expected. Faced with increasing borrowing costs in 2007, Lehman stepped up its issuance of structured products because it was in desperate need of raising funds in order to maintain liquidity.
Securities attorneys Chris Vernon and Susan Healy represent numerous Lehman notes investors in multiple states and have received international media attention for the firm’s Lehman notes investigation. Today’s claim comes on the same day the firm filed a claim on behalf of a Texas executive who lost $1 million on Lehman principal protected notes that are now virtually worthless.
Vernon Healy is a Naples, Florida based law firm that represents investors who are victims of stock fraud and stock losses due to broker fraud and brokerage fraud. Vernon Healy attorneys are experienced in securities arbitration and litigation. The firm is currently representing multiple Lehman structured product investors in FINRA arbitration.
The firm assists clients in recovering losses caused by all manner of financial fraud and negligence. It focuses its practice on complex financial litigation and arbitration as well as business and commercial litigation.
For more information, contact:
Susan Healy, attorney at law
Christopher T. Vernon, attorney at law
http://www.vernonhealy.com
http://www.protectinginvestors.com
(239) 649-5390
Toll Free: (877) 649-5394
email: info@vernonhealy.com
