Structured Products Attorney - Structured Products, Lehman Brothers Principal Protected Notes and Bankruptcy

Lehman bankruptcy liquidation to provide poor recovery to 100 percent principal protected notes investors says Vernon Healy investor advocacy law firm

Naples, Fla. — Investors holding Lehman 100 percent principal protected notes or other Lehman structured products are now receiving word that their share of the initial Lehman bankruptcy distribution on April 17 amounts to 6 cents on the dollar.

“We’ve been informed by a representative of Wilmington Trust, the bankruptcy trustee that is handling Lehman notes distributions, that Lehman note holders may receive up to 21 cents on the dollar with that amount dribbled out over the next 3 to 5 years through the bankruptcy liquidation process,” said investor rights attorney Chris Vernon, of the Vernon Healy law firm. “In our ongoing efforts to assist investors, we are aggressively pursuing UBS in arbitrations before the Financial Industry Regulatory Authority for fraudulent misrepresentations to investors that their Lehman notes were safe and 100 percent principal protected.”

Vernon Healy has aggressively represented investors with more than $13 million in arbitration claims against UBS on behalf of Lehman note holders.

“We believe that this updated information from the bankruptcy trustee will shock those defrauded investors who have not obtained legal counsel yet and have held out hope that the bankruptcy process would provide them with some meaningful recovery,” Vernon said.

Vernon Healy’s advocacy on behalf of Lehman notes investors was featured in an AARP magazine article about the dangers of investing in structured products, which continue to be pitched by brokerage firms to retirees as safe investments. Vernon Healy’s ongoing investigation continues to reveal numerous concerns in relation to the sales of Lehman notes by UBS that have not been addressed by FINRA or federal regulators.

Vernon Healy claims have alleged that UBS fraudulently misrepresented Lehman principal protected notes not only to its brokerage firm clients but also to some of its own financial advisors, who continued to sell Lehman principal protected notes as safe investments to investors well after UBS knew Lehman was in financial trouble.

A second distribution in the Lehman Brothers bankruptcy is scheduled for Sept. 30, 2012 and a third distribution is scheduled for March 30, 2013 with semi-annual distribution thereafter. The Lehman Brothers bankruptcy in September 2008 is the biggest bankruptcy in U.S. history, and it touched off the world financial crisis and most significant economic recession since the Great Depression.

Former CEO Bryan Marsal, who ran Lehman during the bankruptcy, painted a bleak picture for creditors when he told Bloomberg Businessweek that the firm will continue selling assets through 2014 as it tries to raise a total of $65 billion to pay estimated claims of $370 billion.

Bloomberg Businessweek also noted that Enron investors were paid 53 cents on the dollar while average Lehman creditors will receive only an estimated 18 cents on the dollar.

For more information contact:

Chris Vernon
Vernon Healy, attorneys at law
(239) 649-5390
www.vernonhealy.com
www.lehmannotes.com

Vernon Healy Claim: UBS Used Bait and Switch While Selling Ohio Business Owner Lehman Notes

Naples, Fla. – UBS fraudulently misrepresented the investment products it was selling to an Ohio business owner, leading him to believe he was buying principal protected notes backed by UBS when in fact he was sold Lehman notes that were backed by the then financially struggling Lehman Brothers, a claim filed today by securities attorneys at Vernon Healy states.

The Ohio investor made numerous purchases for principal protected products recommended by his UBS financial advisor and totaling more than $150,000, the claim states. Even though the documents provided with the advisor’s initial sales pitch reflected UBS as the entity backing the notes, the actual purchase made on the investor’s behalf was for Lehman notes.

Moreover, the name “Lehman Brothers” did not appear on either the trade confirmation or on the monthly statements, the claim asserts. The sudden switch is especially troubling due to the fact that UBS recommended and sold the Ohio investor Lehman structured products just weeks before Lehman filed for bankruptcy. At that point, UBS clearly knew Lehman Brothers was in deep financial trouble, the claim asserts.

UBS had been well aware of Lehman Brothers financial woes long before it recommended structured products to the Ohio investor. Specifically, UBS had been propping up the faltering company with ultra-high interest loans in 2007 and 2008 while selling Lehman products to retail investors for huge profits.

“UBS engaged in a campaign to downplay and ignore concerns about Lehman’s creditworthiness,” said Chris Vernon, founder of Vernon Healy. “UBS encouraged, and in some cases even deceived its financial advisors into continuing to recommend these products to individual investors without advising them about Lehman’s credit and liquidity risks.”

Once the Lehman bankruptcy was underway, the Ohio business owner joined thousands of other Lehman notes holders left standing at the back of the line with all unsecured creditors.

In addition to compensatory damages, Vernon Healy is seeking significant punitive damages on behalf of the Ohio investor in light of UBS’s gross malfeasance, the claim states.

Vernon Healy has filed more than $12 million in Lehman notes arbitration claims on behalf of investors before the Financial Industry Regulatory Authority. The firm’s investigation of Lehman notes was featured in an AARP magazine article about the dangers of investing in structured products, which continue to be pitched by brokerage firms to retirees as safe investments. Vernon Healy’s ongoing investigation continues to reveal numerous concerns in relation to the sale of Lehman notes that have not been addressed by FINRA or federal regulators.

The securities attorneys at Vernon Healy represent individuals and businesses nationwide in disputes involving all manner of financial fraud and negligence, including Lehman notes, structured products, non-traded REITs, hedge funds, mutual funds, annuities, tax shelters and other investment products.

Contact:
Chris Vernon
Vernon Healy
(239) 649-5390
www.vernonhealy.com
www.lehmannotes.com

Vernon Healy Claim: UBS Deceived Texas Clients and Financial Advisors with Lehman Principal Protected Notes

Naples, Fla. – UBS fraudulently misrepresented Lehman principal protected notes not only to its brokerage firm clients but also to some of its own financial advisors, according to a claim filed today by securities fraud attorneys with the nationwide investor advocacy law firm Vernon Healy.

The nearly $300,000 claim against UBS filed by Vernon Healy today, alleges that the brokerage firm giant fraudulently sold Lehman brothers principal protected notes to a retired Texas couple after it knew that Lehman Brothers was in financial trouble, according to the claim.

“UBS told the retired couple that as a worst case scenario their principal investment would be protected,” said Chris Vernon, founder of Vernon Healy.  “In reality, the notes had no principal protection and were simply unsecured loans to Lehman, which were wrapped in a very complex structure, that helped conceal the lack of protection.”

Vernon Healy attorneys allege that UBS also misled the retired couple’s financial advisor by internally providing misleading and fraudulent marketing and training materials that erroneously described the notes as safe and principal protected, the claim states. UBS’s internal sales force was consistently and strongly encouraged to push  sales of Lehman structured products to main street investors while UBS was propping up Lehman with ultra-high interest loans, which demonstrated UBS’s knowledge of Lehman’s desperation and lack of liquidity, the claim asserts. 

At the onset of the Lehman bankruptcy, the Texas retirees joined thousands of other Lehman notes holders left standing at the back of the line with all unsecured creditors in the Lehman Brothers bankruptcy. According to the claim, UBS sold an estimated $1 billion in Lehman principal protected notes to main street investors. 

In addition to compensatory damages, Vernon Healy is seeking significant punitive damages on behalf of the Texas couple in light of UBS’s gross malfeasance, the claim states.

Vernon Healy has filed more than $12 million in Lehman notes arbitration claims on behalf of investors before the Financial Industry Regulatory Authority. The firm’s investigation of Lehman notes was featured in an AARP magazine article about the dangers of investing in so-called structured products, which have been increasingly pitched by brokerage firms to retirees as safe investments. Vernon Healy’s ongoing investigation continues to reveal numerous other concerns in relation to the sale of Lehman notes to retail investors that have not been addressed by FINRA or other regulators.

Structured products are extremely complex types of debt securities that include a derivative component and whose value at maturity is governed by arcane mathematical formulas, the claim states. 

For more information about Vernon Healy’s nationwide investigation of Lehman notes, visit lehmannotes.com.

The securities attorneys at Vernon Healy represent individuals and businesses nationwide in disputes involving all manner of financial fraud and negligence related to Lehman notes, structured products, non-traded REITs, hedge funds, fund of funds, bonds, mutual funds, annuities, tax shelters and other products.

Contact:
Chris Vernon
Vernon Healy
(239) 649-5390
www.vernonhealy.com
www.lehmannotes.com

Investors harmed by the Lehman Brothers bankruptcy get mixed messages this week

The Lehman Brothers bankruptcy that shook the financial world in 2008 still has investors who lost billions in the collapse wondering when they will begin to recoup their losses. Two decisions this week – one by a judge and the other by the Lehman Estate – did little to bring clarity to the situation or hope that investors will see a significant portion of their money anytime soon, say securities attorneys at Vernon Healy, the investor advocacy law firm.

In one development, a New York bankruptcy judge cleared the way for Neuberger Berman Group LLC to buy the 48 percent remaining equity interest in that company from Lehman Brothers Holdings Inc. over five years, generating about $1.5 billion.

In a second development, Lehman Brothers Holdings Inc. said it would take on billionaire Sam Zell's Equity Residential in a fight for control of Archstone, the company's largest real estate asset. After the Lehman collapse, the company owned 47 percent of Archstone and banks held the remaining 53 percent. But the banks sold half their holdings to Zell earlier this month, and Zell is seeking to buy their remaining 26.5 percent. Lehman Holdings will seek permission this week from a bankruptcy judge to exercise its option to match Zell’s offer with a $1.33 billion offer of its own.

While the Neuberger Berman deal injects a significant amount of cash into Lehman Holdings’ coffers, it appears the money is coming in over five years, meaning investors may see a trickle of cash versus a lump sum. Some estimates put the overall recovery for most investors in the 18 to 20 cents on the dollar range. If these estimates are correct, then investors may suffer an 80 percent or more loss of principal from products that UBS represented to be “principal protected.”

“UBS simply deceived my clients and thousands of other investors – as well as many UBS financial advisors – with respect to the principal protection in these products.  This deception was especially egregious given what UBS really knew about Lehman’s financial situation, including the Archstone purchase,” said securities attorney Chris Vernon of the Vernon Healy law firm.  

And the current Lehman contest with Zell over control of Archstone, while possibly viable for a healthy company is questionable in light of the bankruptcy, Vernon said.

“Lehman made a bad business decision in acquiring Archstone. Given the number of retail clients of UBS and other firms caught up in this bankruptcy as unsecured creditors,  Lehman should be focused on liquidating assets and distributing the proceeds to my clients and other unsecured creditors rather than extending the time that Lehman structured note investors have to wait to recoup what they can from the bankruptcy,” Vernon said. 

Christopher Vernon represents investor clients with more than $10 million in losses due to the Lehman Brothers bankruptcy. Vernon’s investigation into Lehman structured products has been featured in AARP magazine.

Contact for media inquiries.

Chris Vernon
Vernon Healy
239-649-5390
www.vernonhealy.com

UBS fraudulently hawked Lehman principal protected notes to clients,Vernon Healy investor claim states

Naples, Fla. — UBS fraudulently misrepresented Lehman principal protected notes in a heavy sales push to its brokerage firm clients at a time when it was systematically shedding its own Lehman debt behind the scenes in advance of the Lehman Brothers bankruptcy, according to a claim filed today by the nationwide investor advocacy law firm Vernon Healy.

Holders of Lehman notes have been left standing at the back of the line with unsecured creditors in the Lehman Brothers Bankruptcy despite the fact that UBS marketed the notes as safe and principal protected, according to the claim. UBS sold an estimated $1 billion in Lehman principal protected notes to main street investors who are now holding virtually worthless paper, according to the claim. 

Vernon Healy filed close to a half million in claims today on behalf of two UBS clients who assert that they were fraudulently sold Lehman structured products that UBS touted as safe and “principal protected.” The law firm has filed close to $12 million in Lehman notes arbitration claims on behalf of investors before the Financial Industry Regulatory Authority.

Vernon Healy’s investigation was featured in AARP magazine in an article about the dangers of investing in so-called structured products, which have been increasingly sold by brokerage firms to retirees in recent years as safe investments.
 
UBS provided misleading and fraudulent marketing and training material to its own sales force of financial advisors who were encouraged to push sales of Lehman structured products to main street investors, the claim states. Behind the scenes, UBS was propping up the financially faltering Lehman with loans and charging Lehman high interest rates, a situation that demonstrated Lehman’s desperation and poor credit worthiness, the claims assert. 

“As a creditor of Lehman, UBS was in a unique position to assess Lehman’s increasing financial difficulties.  However, despite its knowledge of Lehman’s financial situation, UBS failed to warn its financial advisors or its clients of the increasing risk posed by Lehman structured products,” a claim today filed by Vernon Healy on behalf of an investor states.

Vernon Healy is seeking significant punitive damages on behalf of investors in light of UBS’ gross malfeasance, the claim states. UBS made lucrative profits on its predatory lending strategy to a desperate Lehman at a time when it was making enormous profits on fees and commissions by deceptively selling mom-and-pop investors. UBS told these investors that as a worst case scenario their principal investment would be protected, the claims state.

For more information about Vernon Healy’s nationwide investigation of Lehman notes, see the firm’s web site lehmannotes.com

The securities attorneys at Vernon Healy represent individuals and businesses in disputes involving all manner of financial fraud and negligence including related to Lehman notes, structured products, non-traded REITs, hedge funds, fund of funds, bonds, mutual funds, annuities, tax shelters and other products.

For more information, contact:
Chris Vernon, attorney at law
Vernon Healy
(239) 649-5390
www.vernonhealy.com
www.lehmannotes.com

SEC Warns Investors of the Dangers of Structured Products

Almost three years after the historic bankruptcy of Lehman Brothers, the Securities and Exchange Commission shows concerns that investors continue to be unaware of the potential risks of investing in structured products.

Just last month, the SEC issued a notice reminding investors to carefully review the terms, risks, fees, and other not-so-apparent disclosures before deciding whether to invest in structured products.

Structured products in general continue to be marketed as safe investments with attractive rates of return.  This sales pitch was invalidated when investors who purchased Lehman structured notes through UBS suffered dramatic losses in their portfolios as a result of these investments. 

The SEC warns in its regulatory pronouncement that even though these products often have reassuring names like “principal protection” or “absolute return,” investors could still stand to lose all of their money.  This is the case because structured notes are usually nothing more than unsecured loans to the issuer of the note and have the potential to lose all of their value if the issuer goes bankrupt. In other words, financial institutions effectively borrow money from Main Street investors with no collateral and on terms favorable to the borrower.  

But the problem is far more severe. Main Street investors are not only tricked into making unsecured loans to financial institutions; those institutions also charge investors hidden costs and fees in the process.  Put differently, it is like having somebody borrow money from you and then having that person charge you a fee for accepting your money. 

The SEC acknowledges that “even if the [structured notes] sales material suggests otherwise….structured notes can have hidden or imputed costs, which in some cases may be relatively high.” The SEC also recognizes that these costs generally “are not transparent to investors.”

Another component of the structured notes highlighted by the SEC in its regulatory pronouncement is the fact that in many instances, investors can find themselves tying up their principal for many years and during this time not receive any profit. Investors could bind their money “for upwards of a decade with the possibility of no profit on [their] initial investment….and, in the meantime, inflation could erode [the investors’] purchasing power.,” according to the SEC. 

This scenario continues to occur because structured products are just too complicated for ordinary investors to understand and evaluate and too profitable for Wall Street.  Furthermore, the potential return on structured products’ investments varies significantly based on the method the issuer uses to calculate gains or losses. Investors can find a useful illustration of one of these methods (shark fin payouts) in the SEC structured products warning.

In sum, structured products continue to be investment vehicles financial institutions utilize to get unsecured loans from Main Street investors; are packed with hidden fees and costs; and are designed in such a way that the odds are greatly stacked in favor of financial institutions. 

Vernon Healy is a Naples, Florida law firm that represents investors with more than $10 million in Lehman notes claims, including Yield Optimization and 100% Principal Protected Notes and has conducted an extensive nationwide investigation on structured products. Vernon Healy’s investigation of structured products was featured earlier this year in AARP Magazine. The attorneys at Vernon Healy collectively have more than 30 years of experience representing investors who are victims of stock fraud and stock losses due to misconduct. Vernon Healy securities attorneys are experienced in securities arbitration and assist clients in recovering losses caused by all manner of financial fraud and negligence.

For more information on whether you have a claim involving a structured product, contact the Vernon Healy law firm at 239-649-5390 or Toll Free at 877-649-5394 or email info@vernonhealy.com
.

Vernon Healy securities fraud attorneys file another half million in Principal Protected note claims against UBS

NAPLES -- The investor advocacy legal team at Vernon Healy, in conjunction with Orlando, Florida attorney Neal Blaher, filed more than half a million dollars in claims today against UBS, alleging the Wall Street firm committed securities fraud when it  created and sold investment products such a Lehman notes as well as its own in-house “principal protected” structured products to Main Street investors.

Among those seeking FINRA arbitration in the claims are a retired telecommunications executive, a couple who owned a construction business, a fundraiser for non-profit organizations and a retired dental assistant, according to the claims filed today before FINRA, the Financial Industry Regulatory Authority. The claims seek compensatory and punitive damages against UBS (NYSE:UBS).

The Vernon Healy legal team represents investors with more than $10 million in brokerage fraud claims against UBS related to structured products, principal protected notes and reverse convertibles – referred to as “Yield Optimization Notes” by UBS.

UBS hawked these unsuitable products to risk averse investors and assured them that “principal protected” meant their core investment was safe, according to the claims filed today.

Written material obtained by Vernon Healy as part of its pre-filing investigation shows that UBS disseminated misleading product descriptions to its financial advisors that portrayed the Lehman notes as investments that put none of the investor’s principal at risk, according to the claims.

But the truth of what these investors experienced flies in the face of any principal protection that exists with any promissory note, the claims allege. Ignoring its fiduciary duty to these investors, UBS disregarded a series of red flags that warned of the looming Lehman collapse, such as the company’s Repo 105 transactions and its Archstone REIT, or Real Estate Investment Trust, deal that was a disaster for Lehman, according to the claims.

UBS worked to shore up the failing Lehman Brothers with non-collateralized loans from its own client base of retail investors, while making a handsome profit from its own dealings with Lehman, the claims state. For much of the time that UBS was convincing its clients to loan money to Lehman through Lehman principal protected notes and other structured products, UBS itself was loaning money to Lehman on safer and far more profitable terms than the structured note loans, the claims say. UBS was able to negotiate these favorable loans for its own benefit because it was well aware of and taking advantage of Lehman’s desperate financial situation, the claims allege.

“The Lehman collapse that UBS clearly saw coming left the investors in the claims filed today as well as many others holding nearly worthless investment products and standing at the back of the line of Lehman’s creditors,” Vernon said. “FINRA arbitration panels are recognizing the gross misconduct perpetrated by UBS and frequently are siding with investors.” 

Vernon Healy is a Naples, Florida law firm that represents UBS investors in Florida and multiple other states in the U.S.  Vernon Healy’s ongoing investigation of Lehman structured note sales in the United States has expanded to sales of Lehman structured notes in Europe and South America as well as other structured products sold, such as “reverse convertibles.”  AARP Magazine recently featured Vernon Healy’s Lehman principal protected notes investigation in an article warning retirees about the dangers of structured products.

The attorneys at Vernon Healy collectively have more than 30 years of experience representing investors who are victims of stock fraud and stock losses due to misconduct. Vernon Healy securities attorneys are experienced in securities arbitration and assist clients in recovering losses caused by all manner of financial fraud and negligence.

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

Lehman Principal Protected Notes Investor Awarded $2.2 Million in FINRA Arbitration

In another clear signal that Lehman Notes investors may be able to recoup their losses, a FINRA Arbitration Panel sided this week with a wealthy couple who bought Lehman “100% principal protected” notes and other Lehman structured notes from UBS.

Even better news for investors who have suffered Lehman losses is FINRA’s ruling that UBS must not only buy back the notes at their original cost from Thomas and Christine Motamed, but it must also pay six percent interest dating back to April 2008, when UBS sold the couple $2.2 million in Lehman products.

The Motameds bought $1.65 million worth of Lehman “100% Principal Protection Absolute Return Barrier Notes” and $550,000 of “Return Optimization Securities” weeks after the Bear Stearns collapse and less than six months before Lehman Brothers filed for bankruptcy.

Chris Vernon, whose law firm Vernon Healy has represented investors with nearly $10 million in Lehman notes losses thus far, said UBS has aggressively sold Lehman products to investors seeking a safe haven for their money.

“It is for this reason that the term "Principal Protected" is such an effective and deceptive sales tool to describe structured notes such as the Lehman notes sold by UBS,” Vernon said.

Vernon also said UBS used investors such as the Motameds as a source of funding to shore up failing Lehman Brothers.

“By the latter half of 2007 and well before the 2008 sale involved in the Motamed case, the credit crisis was well underway and Lehman's stock price fell,” Vernon said. “At the same time, Lehman's credit default swap ("CDS") spread -- the cost to insure a loan to Lehman against default - increased dramatically.  Both the stock and loan insurance price trends continued through the February - June 2008 time period, when UBS sold Lehman notes to the Motameds.”

UBS pitched Lehman notes as “safe” investments in which investors’ principal investment would be protected from losses, even after warning signs surrounding Lehman’s faltering financial outlook had already begun to surface within securities industry circles that included UBS, according to Vernon Healy’s investigation.

The so-called “principal protected” notes as well as other structured notes promoted by UBS, were in fact risky, unsecured loans to Lehman Brothers, according to multiple claims filed by Vernon Healy on behalf of investors. These risks were realized when Lehman Brothers’ bankruptcy in September 2008 left investors such as the Motameds, who held Lehman notes and other Lehman structured products, standing at the back of the line with other unsecured creditors.

Vernon said Wall Street’s practice of dumping bad products on Main Street investors continues despite condemnation of this practice in decades past.

“Wall Street firms periodically use their own clients - including many fixed income investors - as a dumping ground for defective products they cook up in their home offices and then pitch worldwide to their financial advisors and clients,” Vernon said.

This practice continues because it is so profitable for brokerage firms such as UBS to engage in these unsavory practices, Vernon said. But his larger concern is that the current structured product version of this practice simultaneously enables the financial industry to borrow billions of dollars from main street investors with no collateral. As a result, the brokerage firms not only profit from creating and selling these structured notes, they also effectively receive loans from their own clients on terms so favorable that professional lenders would never consider them.

Vernon Healy is a Naples, Florida law firm that already represents UBS investors in Florida and multiple other states in the U.S.  Vernon Healy’s ongoing investigation of Lehman structured note sales in the United States has now expanded to sales of Lehman structured notes in Europe as well as the sales of other types of structured products sold in the U.S, such as “reverse convertibles,” which UBS refers to as “Yield Optimization Notes.”

The attorneys at Vernon Healy have decades of experience representing investors who are victims of stock fraud and stock losses due to broker fraud and brokerage firm fraud and misconduct. Vernon Healy securities attorneys are experienced in securities arbitration and business litigation and assist clients in recovering losses caused by all manner of financial fraud and negligence.

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

Lehman’s bankruptcy exposed wrongdoing of other Wall Street Players

By Chris Vernon

On the two year anniversary of its collapse and bankruptcy filing, many contend that Lehman Brothers hid the full extent of its problems from the outside world until the bankruptcy.  While this may be true with respect to main street investors, don’t let Wall Street fool you into thinking that its major players didn’t see it coming. 

One example of Wall Street’s detailed knowledge of Lehman’s problems well in advance of its bankruptcy involves the Union Bank of Switzerland, commonly known as UBS. This is significant to us as retail investors because UBS, like some other financial institutions on Wall Street, used this knowledge to its own advantage rather than protect its own clients or the investing public.    

Although it would be impossible to detail all of what UBS knew about Lehman in this short commentary, some of what we have pieced together during our investigation is detailed below. This intimate knowledge that UBS had of Lehman was due to its relationship as a lender of short term and collateralized loans to Lehman.

In 2007, UBS discussed a possible merger with Lehman.¹  During that period, more than 75 percent of Lehman’s overall equity —more than $100 billion— was concentrated in risky mortgage and real estate assets. So large was the amount of Lehman’s illiquid assets during this period that Lehman employees referred to their balance sheets as “dead assets schedules.”²  During this period, UBS also became aware that Lehman’s credit default swap (“CDS”) spread — the cost to insure a loan to Lehman against default — increased dramatically.

Throughout this same period, UBS was heavily recommending and selling “structured notes” issued by Lehman to its own clients. Although “structured notes” are very complicated products not understood by many financial advisors, much less retail investors, these products are for the most part unsecured and illiquid medium term loans to Lehman. 

While urging its own client base to effectively loan money to Lehman on an unsecured basis through illiquid structured notes, UBS was using its own firm money to make fully collateralized short term loans to Lehman, charging outrageously high interest rates.  These Repo 105 loans by UBS to Lehman are now the focus of an SEC investigation of Lehman.³   UBS was able to charge such high interest rates on these loans because it was aware of Lehman’s severe financial problems and resulting desperate need for the Repo 105 loans. ⁴

Through the spring of 2008, UBS continued to capitalize on Lehman’s problems by charging Lehman shocking rates of interest for fully collateralized short term loans.⁵   Simultaneously, UBS continued to profit from the recommendation and sale of Lehman “structured notes” – which were loans to Lehman by UBS clients that were unsecured, longer term, and far less appealing in terms of likely returns than the “Repo 105” loans that UBS was making to Lehman.  

How outrageous was UBS’s behavior? By way of example, while still selling Lehman structured notes to its own clients, UBS charged the now “desperate” Lehman an interest fee of $186 million on a very short term and fully collateralized multi-billion dollar loan.⁶  If this short term loan return were annualized, it would equate to a return to UBS of more than 150 percent annual interest on the loan. As one of Lehman’s own employees said in early 2008, “Everyone knows 105 is an off balance sheet mechanism so counterparties are looking for ridiculous levels” to try to squeeze Lehman .⁷

Although the collateral and return disparities between the loan deals that UBS made for its clients and the loan deals that UBS made for itself are very troubling, it was the liquidity disparity that became especially significant in the summer of 2008 leading up to Lehman’s bankruptcy.  Specifically, UBS clients holding the Lehman structured notes recommended by UBS were effectively unable to sell or liquidate these notes until they matured. In contrast, over the summer of 2008, UBS significantly reduced its weekly Repo 105 loans it had made to Lehman.  

For the foregoing reasons, the Lehman bankruptcy in September of 2008 had a far greater impact on UBS’s clients than on UBS itself.  When Lehman declared bankruptcy, UBS investors who had invested in Lehman structured notes were left standing at the back of the line with the unsecured creditors in the Lehman bankruptcy and will likely recover little of their original investment. In contrast, after the Lehman bankruptcy announcement, UBS issued a press release⁸ regarding its limited exposure due to its loans and other transactions with Lehman. Based on our investigation, it appears that while UBS was systematically shedding its own exposure to Lehman debt, it was continuing to develop and pitch Lehman structured notes with so-called principal protection to its own client base.

UBS’s public statement earlier this year that the Lehman Bankruptcy Report does not show that the “counterparties such as UBS acted inappropriately” is dubious. The Lehman Bankruptcy Report was designed to look into the activities of Lehman, not other financial institutions on Wall Street, like UBS. In reality, the Lehman Bankruptcy Report represents further evidence that firms such as UBS took advantage of the Lehman situation for their own benefit, while utterly failing their own clients.    

Christopher Vernon is a Naples based attorney with the law firm Vernon Healy.  He advocates for the rights of investors throughout the United States and abroad—both in and out of the courtroom and arbitration hearing room. Mr. Vernon currently holds an AV rating by Martindale-Hubbell, has been repeatedly recognized by his peers in The Best Lawyers in America, and has also been consistently recognized in the Florida editions of the Super Lawyers publication. Mr. Vernon has spoken at both national securities and national trial attorney conventions and has also conducted continuing education in the U.S. and abroad for CPAs, CFAs, CFPs, investment professionals, board certified business litigation lawyers and board certified trust and estate lawyers. Mr. Vernon has also provided training for and been retained as an expert by government agencies on securities matters. 

-----------

  ¹ See Lehman Brothers Examiners Report dated March 11, 2010, Volume 8, Page 52
  ² Lehman Brothers Examiners Report Volume 3, Page 842
  ³ See “SEC Homes In on Lehman, 'Funds of Funds'.” The Wall Street Journal. September 10, 2010
  ⁴ See Lehman Brothers Examiners Report Volume 3, Page 880 Footnote 3382
  ⁵ Id.
  ⁶ Id. (reference to email LBEX-DOCID 3207903)
  ⁷ Lehman Brothers Examiners Report Volume 3, Page 881
  ⁸ See UBS Press release from September 16, 2008

Vernon Healy represents investors with close to $10 million in Lehman losses

It’s close to two years since the collapse of Lehman Brothers on Sept. 15 that touched off the financial meltdown that plunged economies around the world into the Great Recession.
 
Our firm is assisting investors who are seeking accountability from the perpetrators of the “Great Deception.”

Vernon Healy currently represents investors with close to $10 million in Lehman “principal protected notes” , reverse convertibles related to Lehman, and other structured products. Brokerage firm UBS sold the  principal protected notes as a safe investment.  Many investors,  including many retirees, were told their Lehman investment was 100 percent “principal protected.”  

The disclosure that the SEC investigation of Lehman’s so-called “Repo 105”  and "Archstone" deals  are heating up is welcome news.   Among other things, the “Repo 105” deals allowed Lehman to conceal as much as $50 billion in debt from its balance sheet. 

Our firm has done substantial research as part of our Repo 105 investigation and Archstone investigation on behalf of investors. 

 
What’s been lost in the coverage of the SEC investigation so far is the fact that UBS, as a counterparty to these Repo 105 deals, knew about the financial  problems in play with Lehman. However, UBS continued to push these supposedly safe, “principal protected”  and other Lehman structured products  on their own clients, even as they saw behind the scenes just how precarious Lehman’s financial solvency had become. 

For more information, contact Vernon Healy at (239) 649-5390.