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

Vernon Healy files Lehman Principal Protected Notes claim against UBS on behalf of Naples surgery assistant

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

 

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 law firm: UBS concentrated risky Lehman structured products and stocks in baby boomer’s nest egg

Naples, Fla. — UBS engaged in gross misconduct when it marketed and sold more than $125,000 in Lehman structured products to a Florida baby boomer couple nearing retirement after public warning signs about Lehman Brothers’ financial solvency had surfaced, according to a $700,000 claim filed today by the Vernon Healy law firm. 

The couple, of Bonita Springs, Fla., has lost close to $700,000 out of their retirement accounts at UBS. Their UBS broker incompetently exposed the couple to unsuitable and preventable risks by, among other things, over concentrating two of their IRA accounts — constituting the bulk of their UBS retirement accounts — in stocks, the claim states.

In addition, a novice UBS broker urged the couple to purchase $125,000 in Lehman structured products called “return optimization notes” on March, 26, 2008 — after significant concerns about Lehman’s creditworthiness surfaced following the collapse of Bear Sterns that deepened Wall Street’s subprime credit crisis, according to the claim.

UBS sold the couple their Lehman structured products after Lehman’s first quarter 2008 earnings report raised concerns in the financial industry about its creditworthiness.  As investment professionals, UBS was well aware, or should have been well aware, that Lehman’s credit risk was a significant concern when it sold the Lehman structured products, the claim asserts.   

The UBS (UBS) sales pitch, emphasized the safety of Lehman Structured Products.    However, the notes sold to the investors in this case, like so-called “principal protected” notes, were in fact risky, unsecured loans to Lehman Brothers, according to the claim. 

Lehman Brothers’ bankruptcy in September 2008 left holders of structured notes standing at the back of the line with other unsecured creditors. They may recover little of their original investment.

Structured products, including principal protected notes and return optimization 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, securities attorney Chris Vernon said.

“Essentially, UBS was selling Lehman structured notes so Lehman could obtain unsecured loans from the unwitting investing public — including UBS’ own retail clients — to support its faltering balance sheet and operations,” Vernon said. “While investors were told they were buying safe ‘notes,’ or ‘structured products,’ they were actually funding a failed Wall Street bailout attempt.”

As early as 2005, industry regulators from the Financial Industry Regulatory Authority (formerly known as the NASD) raised concerns about the way that Wall Street brokerage firms and banks were marketing complex structured products, including structured notes, to individual investors. 

Vernon Healy is a Naples, Florida based law firm that is representing multiple Lehman structured product investors in FINRA arbitration. 

URL:

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

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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