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

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

Vernon Healy files an additional $1.1 million in Lehman note claims against UBS

Naples, Florida — Nationwide investor advocacy law firm Vernon Healy filed $1.1 million in securities fraud claims today against UBS for misconduct involving sales of Lehman structured products that promised investors “principal protection” but left them with virtually worthless investments.

In the past week, Vernon Healy has filed more than $2 million in claims against UBS on behalf of investor victims from Tennessee, Texas, Maryland, Pennsylvania, Missouri and  Florida.

All but one of the investors for which Vernon Healy is filing claims today are retired; They include a retired newspaper advertising manager, a retired printing company employee, a retired chemical technician, a widowed homemaker and farm owner, a retired teacher, a surgeon and a CPA.

The nationwide $2.5 million fine and $8.25 million restitution order issued by the industry-sponsored Financial Industry Regulatory Authority against UBS in April won’t assist any of the victims on behalf of whom Vernon Healy is filing $1.1 million in claims against UBS today.

Attorney and founding partner Chris Vernon has blasted FINRA’s action against UBS as paltry and inadequate.

Vernon Healy represents investors with close to $11 million in Lehman structured product losses.

“Despite a public outcry in the wake of egregious misconduct by Wall Street brokerage firms during the financial crisis, we’ve seen lapdog responses from federal regulators,” Vernon said. “Investors need aggressive regulatory watchdogs that are willing to send a message that securities fraud won’t be tolerated in the future.”

UBS (NYSE: UBS) designed these Lehman structured products and marketed them to its customers as safe and 100 percent “principal protected” even though in reality, the principal protected notes were essentially unsecured loans to now-bankrupt Lehman Brothers, the claims state.

UBS was in a unique position to know of Lehman’s precarious financial position and in fact UBS engaged in predatory lending tactics in which it loaned Lehman money behind the scenes to prop up the failing firm, according to the claims.  However, while UBS took steps to protect itself from a Lehman collapse in these “Repo 105” deals, UBS left its own customers totally exposed to the consequences of a Lehman failure and effectively lied and assured them that in a worst case scenario their principal investment was protected, according to the claims.

Vernon Healy’s investigation, which has been spotlighted in an AARP Magazine article, has found that UBS was distributing misleading material to its own financial advisors.

In one of the cases filed today, the broker concentrated more than 50 percent of the investor’s account in a single industry and 37.5 percent of the investor’s account in a single issuer, Lehman Brothers.

“UBS compliance and supervision apparently used the ‘principal protected’ label as an excuse to ignore concentration problems in customer accounts like (that of the investor),” the claim states. “The required industry procedures that protect a customer from the risk associated with such an extreme concentration were completely disregarded in this case.”

The securities attorneys at the Vernon Healy collectively have more than 30 years of experience representing investors who are victims of securities fraud and all manner of financial negligence. Based in Naples, Florida, Vernon Healy has conducted aggressive nationwide investigations of structured products, reverse convertibles, fixed income products, bond funds, hedge funds, non-traded reits, and various securities fraud cases and Ponzi schemes.

Vernon Healy and the Carrigan law firm file $1 million in securities fraud claims against UBS for Lehman principal protected note conduct in Texas state court

Houston, Texas — Attorneys for investors have filed $1 million in securities fraud charges in Texas state court against UBS in an effort to force UBS to answer for its Lehman principal protected note sales in a public court case versus private industry-sponsored arbitration.

Trial lawyer Stephen Carrigan, who has hired nationwide investor protection law firm Vernon Healy as co-counsel, is pursuing two lawsuits in Texas state court where UBS may have to defend its conduct in a public venue versus the secret industry-sponsored arbitration forum run by FINRA, the Financial Industry Regulatory Authority. FINRA proceedings are often closed to the public and case documents typically aren’t public record during the proceedings.

“The closed door FINRA proceedings have allowed UBS to hide some of its most egregious conduct from public view and public accountability,” attorney Carrigan said. “We want UBS to answer for its conduct in a public court case before a public jury.”

Arbitrators have repeatedly sided with investors and against UBS in FINRA arbitration in cases involving Lehman principal protected notes that were pitched and sold to investors as safe and 100 percent principal protected. The suits — one filed in Nueces County, Texas and the other filed in Harris County, Texas — call upon a jury to impose significant punitive damages against UBS.

“FINRA has only imposed very limited monetary sanctions as a result of finding gross misconduct, and as a result the monetary sanctions are incredibly inadequate in light of the enormous profits UBS obtained by taking advantage of Lehman’s financial troubles to engage in a tremendously lucrative predatory lending strategy while simultaneously earning fees and commissions from the Lehman products it sold to its customers without disclosing the risks,” one of the lawsuits claims. “Very significant punitive damages are appropriate in light of UBS’ gross malfeasance in this case.”

Carrigan is also the Plaintiff in one of the lawsuits filed against UBS on May 14, 2011. The suit claims a broker sold him $750,000 in Lehman principal protected notes and repeatedly, in essence said “there was no downside risk in these notes and that the worst possible case was the Plaintiffs would break even and receive a 100 percent guaranteed return of their investment,” the lawsuit claims.

UBS (NYSE: UBS) designed the Lehman structured product and marketed it to its customers as safe and 100 percent “principal protected” even though in reality, the principal protected notes were essentially an unsecured loan to now-bankrupt Lehman Brothers.

These UBS-designed investment products supplied Lehman Brothers (LEHMQ.PK) with an infusion of unsecured loans from main street investors as Lehman Brothers’ solvency became a concern, according to the claim. The Lehman Brothers bankruptcy in September 2008 left Lehman note holders standing essentially at the back of the line as unsecured creditors.

In the second lawsuit, the broker sold a Texas investor $300,000 worth of Lehman principal protected notes. After the Lehman bankruptcy, the investor saw the value of the notes drop to zero on his monthly account statement, the lawsuit states. Initially, the broker told the investor it was just “an accounting error” but later the broker said UBS would make its clients whole, which didn’t happen.

In April, FINRA hit UBS with a $2.5 million misconduct fine for its sales practices with respect to Lehman structured products. Following the announcement, investor rights attorney Christopher Vernon blasted the action as inadequate, saying: “FINRA, Wall Street’s self-regulatory organization, has handed one of its own a paltry fine for gross misconduct and deception of investors.”

The Vernon Healy law firm and its advocacy on behalf of Lehman note investors was recently featured in a March 2011 AARP Magazine article “The Time Bomb in Your Nest Egg” discussing the dangers of investing in structured products. Vernon Healy, based in Naples, Florida, represents investor victims with Lehman note losses in excess of $10 million.

For more information contact:

Christopher Vernon
Vernon Healy, attorneys at law
999 Vanderbilt Beach Road, Suite 200
Naples, Florida 34109
239-649-5390
877-649-5394
info@vernonhealy.com
vernonhealy.com
lehmannotes.com

Vernon Healy: FINRA fine of UBS for Lehman notes deception is woefully weak

The investor advocacy law firm of Vernon Healy, which represents Lehman principal protected notes investors around the nation, called the $2.5 million fine issued against UBS today by Wall Street’s self regulatory organization a disturbingly small amount.

FINRA, the Financial Industry regulatory Authority, fined UBS $2.5 million and ordered that the brokerage firm pay $8.25 million in restitution to UBS clients who purchased Lehman principal protected notes.

“I’m disturbed by the small size of the fine,” said Chris Vernon, who represents investor victims with more than $10 million in Lehman note losses. “FINRA, Wall Street’s self-regulatory organization, has handed one of its own a paltry fine for gross misconduct and deception of investors.”

Arbitration panels have repeatedly sided with investors against UBS in cases involving Lehman principal protected notes and other Lehman structured products. Although FINRA’s action helps investors who are pursuing claims, it comes after considerable time has lapsed, Vernon said.

“How long does it take FINRA to act?” said Vernon, who began filings cases on behalf of investors against UBS involving Lehman principal protected notes more than 2 years ago. More than a year ago, Vernon Healy detailed malfeasance by UBS during the months leading up to the Lehman bankruptcy which is also the focus of the FINRA investigation.

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 deal that was a disaster for Lehman, according to claims filed by Vernon Healy.

Investors who bought Lehman principal protected notes were told just that — that their principal was protected. But when Lehman collapsed and filed bankruptcy in September 2008, these investors lost virtually all their principal, according to claims filed by Vernon Healy.

FINRA’s restitution order does not prevent customers from either pursuing their pending arbitration claims against UBS or from filing new arbitration claims, according to Vernon Healy.  What the agreement between FINRA and UBS does is to set the “floor” for claims filed by customers who purchased “100% principal protected” structured notes issued by Lehman Brothers during the relevant period and who meet the other criteria set forth by FINRA.

Those customers who pursue their claims in arbitration will recover at least the restitution amount in arbitration and may recover damages well in excess of that amount, depending on the facts of their individual cases and the findings of their arbitration panels, Vernon Healy believes.

Vernon Healy’s investigation reveals that the same supervision lapses, unsuitable sales and misleading marketing and sales techniques that FINRA found also occurred in connection with many of UBS’s other structured product sales.

Written material obtained by Vernon Healy as part of its investigation more than a year ago showed 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 multiple claims filed against UBS by Vernon Healy.

These UBS-designed investment products supplied Lehman Brothers with an infusion of unsecured loans from main street investors as Lehman Brothers’ solvency became a concern, according to claims filed by Vernon Healy. The Lehman Brothers bankruptcy in September 2008 left Lehman note holders standing essentially at the back of the line as unsecured creditors.

When pitching these structured products after the March 2008 collapse of Bear Sterns and through the summer of 2008, UBS omitted telling their own financial advisors and their clients that Lehman was on the brink of insolvency, according to claims filed by Vernon Healy.

The Vernon Healy law firm and its advocacy on behalf of Lehman note investors was recently featured in a March 2011 AARP Magazine article “The Time Bomb in Your Nest Egg” discussing the dangers of investing in structured products. The story told of a 55-year-old restaurant owner represented by Vernon Healy who was sold $130,000 in Lehman “principal protected notes” and other structured products that lost virtually all their value and also of a Michigan family represented by Vernon Healy that lost $275,000 on Lehman notes and other structured products sold by UBS.

The securities attorneys at Vernon Healy collectively have more than 30 years of experience representing investors who are victims of securities fraud and all manner of financial fraud and negligence.

For more information,
Contact Chris Vernon
cvernon@vernonhealy.com
(239) 649-5390

www.vernonhealy.com
www.lehmannotes.com

Wall Street using principal protected notes and other structured products to borrow collateral-free billions from main street investors

Naples, Florida — The Vernon Healy law firm is warning retirees to beware of structured products, principal protected notes, reverse convertible notes, and other structured products that Wall Street firms have increasingly dumped on conservative main street investors.

“The financial industry is effectively using structured products to borrow billions of dollars from Main Street investors with no collateral,” Chris Vernon is quoted as saying in the March issue of AARP magazine, the national publication for the retiree advocacy organization with more than 40 million members.

Chris Vernon and the Vernon Healy law firm represent investors with more that $10 million in losses on Lehman principal protected notes and other Lehman structured products sold by UBS.

Vernon Healy represents two of the investors quoted in the AARP Magazine article that warns investors about the dangers of structured products. Charles Replogle, a 55-year-old restaurant owner from Vero Beach, Fla., was sold $130,000 in Lehman “principal protected notes” and other structured products that lost virtually all their value. Rob Brunhild, 49, of Bloomfield, Mich., also represented by Vernon Healy, was investing for his family and 80-year-old mother. His family lost $275,000 on Lehman principal protected notes and other structured products.

“Clearly, Wall Street is targeting fixed-income investors, most of whom are retirees seeking a steady source of income while guarding against any material loss of principal,” Vernon told AARP. The article notes that Vernon has represented hundreds of older investors who have been burned.

By “structuring” products, Wall Street gets paid to create the complex product via underwriting fees and then gets paid again to sell the product. Brokerage firms also use the complexity of these structured products to obscure the risk of loss of principal.

“A traditional bank wouldn’t make loans on these terms so why should retired investors take such a risk?” investor rights attorney Chris Vernon said. “Wall Street firms are borrowing from main street investors and asking retirees to loan them money with no collateral.”

The complexity, among other things, allowed UBS to dump Lehman principal protected notes on investors even as Lehman Brothers was on the verge of insolvency in the summer of 2008.

Investors who bought these Lehman principal protected notes were told just that — that their principal was protected. But when Lehman collapsed, these investors lost virtually all their principal.

According to Vernon, there is no shortage of financial information on any given strategy or product.  In fact, there is an overwhelming amount of information available to investors.

“What investors truly need today is independent and conflict-free advice from professionals qualified to analyze and interpret complex financial markets and complex financial products” Vernon says.  “Brokerage firms are providing conflict ridden recommendations along with a mountain of complex information in the form of a prospectus, which is the exact opposite of what investors need.”

Christopher Vernon, founder of the Vernon Healy law firm, 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 as a top securities attorney. 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 securities regulators, CPAs, CFAs, CFPs, investment professionals, board certified business litigation lawyers and board certified trust and estate lawyers.

UBS dumped defective structured products on retirees

The sale of Lehman notes and other structured products by UBS is a classic example of why doing business with a Wall Street firm is hazardous.

These Wall Street firms periodically use their own client base – including many fixed-income retired investors – as a dumping ground for defective products, including structured notes and reverse convertibles, which are also called “return optimization notes.” The brokerage firms cook up these structured products in their home office and then pitch them worldwide to their financial advisors and client base.

Although this has gone on in various forms for decades, my larger concern is that these structured products are now effectively being used by the financial industry to borrow billions of dollars from main street investors with no collateral.

A traditional bank wouldn’t make loans on these terms so why should retired investors take such a risk? Wall Street is borrowing from main street investors and asking retirees to loan them money with no collateral.

Unfortunately, most retired investors don’t understand these products and the deal they are effectively making.

By “structuring” products, Wall Street achieves the dual purpose of getting paid to create the complex product via underwriting fees and then getting paid again to successfully sell the product. Brokerage firms use the complexity of these structured products to obscure the risk of loss of principal.   The complexity, among other things, allowed UBS and other firms to promote these products with little focus on the actual entity borrowing the money – an egregious omission in the case of Lehman as the borrower.

Investors who bought these Lehman principal protected notes were told just that — that their principal was protected. But when Lehman collapsed, these investors lost virtually all their principal.

When pitching these structured products through the summer of 2008, UBS omitted telling their own financial advisors and their clients that Lehman was on the brink of insolvency.

To put the enormity of this omission into perspective, imagine your financial advisor suggesting that you buy a corporate bond and adding that the identity of the corporation backing the bond is not really important in deciding which bond to buy.

These structured products create an especially troubling conflict of interest when the money put up by investors for these notes goes to the same brokerage firm selling them. For example, UBS sold “UBS return optimization notes” to its own base of UBS clients in addition to selling Lehman notes and Lehman return optimization notes.

UBS – and other Wall Street firms – are recommending that their own clients loan money to them on an unsecured basis.  In other words, the financial advisor is effectively suggesting that the best possible investment for the client would be to make an unsecured loan to the financial advisor.  It is amazing to us that this is an accepted and widespread practice in the securities industry.
Clearly, Wall Street is targeting fixed-income investors, most of whom are retirees seeking a steady source of income who want to guard against any material loss of principal, to sell these investments.  As a result, firms such as UBS have deceptively used the term “principal protected” very effectively to lull fixed income investors into focusing on the enhanced income opportunities provided by structured notes rather than on the true risks of principal loss underlying these products.

Like that quote attributable to Willie Sutton – who robbed banks because “that’s where the money is” – Wall Street targets wealthy retirees who are looking for something safe but that has a return that is more appealing than CDs or Treasury Bonds.  For this reason, the term “Principal Protected” is such an effective and deceptive sales tool to describe structured notes such as the Lehman notes sold by UBS.

Our firm represents investors with more than $10 million in Lehman notes claims, and we have conducted an extensive nationwide investigation that has collected information from financial advisors and investors from around the country.

For more information on whether you have a claim involving a structured product, contact theVernon Healy law firm at 239-649-5390 or Toll Free at 877-649-5394 or 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 UBSmust 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

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.

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  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
See UBS Press release from September 16, 2008