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

Lehman notes and bonds hurting local governments

The Lehman Brothers bankruptcy more than a year ago is old news to most Americans, but aftershocks from the largest bankruptcy in history continue to affect local governments across the country. Municipalities that tried to avoid risk by buying highly rated Lehman products now find themselves holding products that are now nearly worthless, according to the Wall Street Journal.

The casualties – dozens of school districts, cities and counties – lost more than $1.7 billion in the Lehman collapse. And for them, the pain from those losses continues.

Nowhere is that more true than in San Mateo, Calif., a municipality of 735,000 residents near San Francisco that saw the largest loss from the bankruptcy. Following the September 2008 collapse of Lehman Brothers, San Mateo saw $155 million vanish, the Wall Street Journal reported.

According to the Journal:

The county’s investment pool had purchased highly rated Lehman bonds and Lehman notes, but these are now trading at roughly 20 cents on the dollar. Making matters worse, the loss caused by Lehman Brothers’ collapse came on the heels of deep budget cuts at the state level that had been brought by California’s financial woes.

The one two punch meant plans for capital investments for San Mateo’s schools, community colleges and the county were scrapped. Teachers have been laid off and the county has scaled back its commuter rail service. For the first time in its history, San Mateo will have mass layoffs this spring, cutting hundreds of jobs.

The sad thing about San Mateo is that it is not an isolated case. Municipalities across the country have suffered similar fates but have seen no sign of relief from the government.

Local government leaders who sought a share of TARP funds were granted concessions in the writing of the bill but so far have seen no money. President Obama’s Treasury Secretary Timothy Geithner has refused to release TARP funds to make municipalities whole. Treasury officials say the request, while well intentioned, would lead to a flood of such requests from other investors.

Vernon Healy is representing investors with large Lehman losses on structured products and Lehman principal protected notes in FINRA arbitration. As the Wall Street Journal article shows, it’s not only individual investors who’ve been hurt by Lehman products but also local government taxpayers.

For more information, contact
Vernon Healy
Christopher T. Vernon, attorney at law
Susan R. Healy, attorney at law
http://www.vernonhealy.com
http://www.lehmannotes.com
(239) 649-5390
Toll Free: (877) 649-5394

email: info@vernonhealy.com

Investors around the globe still living a Lehman Brothers nightmare

Just over a year ago, investors first faced the waking nightmare of 150-year-old global finance giant Lehman Brothers making the largest bankruptcy filing in U.S. history. It was the first domino to fall in the chain of events that gave rise to a worldwide recession.

A year later, the fallout from the bankruptcy continues around the globe. While investors, including ones represented by Vernon Healy, are in various stages of seeking to recoup their losses through arbitration and the courts, governments facing pressure from those who suffered losses are likely to make a stab at regulatory changes to keep future investors from suffering the same fate.

In the U.S., UBS and others such as Raymond James sold investors Lehman structured notes promoting them as low risk and safe, but those structured products ultimately proved worthless in the wake of the Lehman collapse. The misery for these investors is shared in Asia by those who unwittingly bought similarly risky products called High Notes 5 and Lehman Minibonds through DBS and the Royal Bank of Scotland.

Investors from Singapore are now following the lead of their American counterparts and have recently begun filing multi-million dollar lawsuits against the firms that sold them these risky products. Some 10,000 small investors, many of them retired and risk averse, bought Lehman products that exposed them to far more financial danger than they knew.

It is worth noting by investors in Lehman structured notes that, at this point, authorities have found evidence of wrongdoing against the banks in Singapore that sold these other “low risk” Lehman products.

Alongside the lawsuits, these Singapore investors are petitioning the government for regulatory change, and insiders say there will likely be political fallout for the ruling party if there is none. But as in the U.S., these measures would be too little too late for small investors whose life savings have been wrecked following the Lehman collapse.

In the U.S., debate is now raging in Congress and on Wall Street about what form regulatory change should take to insure that future investors are not unknowingly exposed to financial risk.

Of note is the fact that securities regulators at FINRA (the Financial Industry Regulatory Association, formerly the NASD) warned brokerage firms as early as 2005 to provide accurate information to investors when selling structured products like Lehman Notes. 

Among the proposals is an agency whose job it would be to look out for small investors and to spot products, such as Lehman structured notes, that are at best unsuitable, or inappropriate, for them.  The proposed Consumer Financial Protection Agency is facing stiff opposition from the financial industry despite efforts this week by proponents of such an agency to scale back the scope of its mission.

The financial industry balks at the power of the agency and says it would kill creativity in the financial sector and put undue burdens on small business that offer credit to their customers. There are already some signs that discontent with big government and pressure on Congress from financial industry lobbyists could stymie any effort for meaningful change.

It will be interesting to see the final form of an agency aimed at protecting financial consumers, should it survive the political battle.

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 is aggressively investigating abuses by brokerage firms and representing multiple Lehman structured product investors in FINRA arbitration, among them:

-- Private investors who thought a comfortable retirement lay ahead. They now live with massive losses thanks to investments in Lehman Principle Protected Notes recommended by brokers who failed to adequately disclose risk.

-- A charitable trust that lost more than $900,000 in Lehman products. The trust’s representatives were led to believe the Lehman products had protected the principle investment. The losses have endangered this trust’s support of environmental causes, the arts and youth programs.

-- A couple who sold their successful business and planned to retire and live on investment income from the proceeds of the sale. The couple lost $650,000 of their principle to bad investments, some of which were made without the couple’s permission and included Lehman backed products. URL:

For more information, contact:
Christopher T. Vernon, attorney at law
Susan R. Healy, attorney at law
http://vernonhealy.com/
http://www.protectinginvestors.com 
(239) 649-5390
Toll Free: (877) 649-5394
email: acostanzo@vernonhealy.com

Vernon Healy files multimillion dollar investor claim against Citi Smith Barney relating to municipal bonds and preferred stocks

Naples, Fla. — The Vernon Healy law firm filed a claim against Citi Smith Barney today on behalf of a Naples couple who suffered millions in losses following their  stockbroker’s  trades in the couple’s account without their permission and inappropriate investing activity in municipal bonds and preferred stocks.  

The portfolio, which contained more than $10 million in municipal bonds when it was transferred to Citi Smith Barney, now known as Morgan Stanley Smith Barney (Symbol: C, MS), was initially designed to generate a fixed income for living expenses for the young couple who retired early to Florida following a successful sale of their businesses.

After dramatic losses in the couple’s municipal bond account, managers at Citi Smith Barney arrogantly rejected the couple’s complaints about unauthorized trades and other broker improprieties and failed to conduct an objective investigation, according to the claim.  This failure to adequately investigate was especially inappropriate in light of the 9 other customers who have lodged complaints against the same broker.  The previous customer complaints include ones involving unauthorized trading as well.

The broker’s previous employer, Merrill Lynch, has paid more than $550,000 to settle past customer abuse complaints, according the claim.

The Vernon Healy law firm is seeking phone records of the brokerage firm and broker in addition to other documents as further evidence of the allegations of unauthorized trading.

Of note, the broker purchased preferred stock in his own employer, Citigroup, in early 2008 for the couple’s account, a practice barred by Citigroup internal rules, the claim states.  Citi Smith Barney’s managers and compliance department failed to discover and stop the broker’s Citigroup trades on which the couple lost more than $400,000 in principal, according to the claim.

The Smith Barney broker moved greater portions of the couple’s fixed income bond portfolio to financial industry preferred stocks in early 2008 as the troubled financial industry sector rapidly deteriorated.  For example, the broker added preferred stock in HSBC, Lehman Brothers, PNC, Royal Bank of Scotland, AIG, Merrill Lynch, Wachovia, and Bank of America in early 2008, the claim states.

After the monumental collapse of Bear Sterns in March 2008, the Smith Barney broker executed unauthorized trades in the couple’s account and purchased Morgan Chase, Citigroup, Deutsche Bank, Credit Suisse, Barclays, and Wells Fargo, Allianz, ING, Fannie Mae, and Freddie Mac preferred stocks and convertible products, according to the claim.

The couple’s account lost $650,000 in principal as a result of the broker’s purchases of AIG, ING, Freddie Mac, and Fannie Mae between May 2008 and July 2008, the claim states. 

In addition, the claim asserts that the stockbroker purchased Main Street Natural Gas bonds backed by Lehman Brothers at a premium in April 2008 in the couple’s account, despite significant industry concerns about the financial sector and especially Lehman Brothers. The couple lost more than $100,000 in principal on this bond alone, which has come under regulatory scrutiny since it lost 75 percent of its value within a year of its issuance and sale to the public.      

According to Chris Vernon, the lead attorney for the investors, increasingly his law firm is seeing a pattern involving inappropriate activity by brokers and brokerage firms in connection with the sale of both preferred stocks and municipal bonds. 

Financial industry regulator FINRA recently expressed concerns over municipal bond sales to retail investors that included a specific focus on the municipal gas bonds backed by Lehman discussed above that were sold to retail investors.

“I’m hopeful regulators will enact reforms to protect future municipal bond investors, but unfortunately there are a great many investors who have already been overcharged for bonds and who have already been exposed to far greater bond investing risks than they were led to believe by brokers,” Vernon said.   

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.

URL: http://www.protectinginvestors.com/2009/07/vernon-healy-files-multimillion-dollar-investor-claim-against-citi-smith-barney-relating-to-municipa.html

For more information, contact:
Christopher T. Vernon, attorney at law
Susan R. Healy, attorney at law
http://www.protectinginvestors.com
http://www.vernonhealy.com
(239) 649-5390
Toll Free: (877) 649-5394
email: acostanzo@vernonhealy.com