Downey Financial Corporation - Securities Class Action

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Downey Financial Corporation Summary: The original complaint charges Downey and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Downey is a savings and loan holding company. Specificcally, the complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. As a result of defendants’ false statements, Downey’s stock traded at artificially inflated prices during the Class Period, reaching a high of $74.85 per share in June 2007.

On October 10, 2007, Downey announced that it expected to incur an operating loss for the 2007 third quarter due to the continued weakening in the housing market. Then, before the market opened on March 17, 2008, Downey released its monthly selected financial results for the 13 months ended February 29, 2008, which showed a significant increase in non-performing assets to almost 11% of total assets, up from 1.2% in May 2007. Downey had to restructure debt for many borrowers to avoid having their loans fail. On this news, Downey’s stock dropped to close at $18.82 per share on March 17, 2008, a decline from $19.14 per share on March 14, 2008, and a decline of 68% from $59 per share on October 9, 2007.

According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) defendants’ portfolio of Option ARMs contained millions of dollars worth of impaired and risky securities, many of which were backed by subprime mortgage loans; (b) prior to the Class Period, Downey had seen Countrywide’s growth and had started to get more aggressive in acquiring loans from brokers such that the loans were extremely risky; (c) defendants failed to properly account for highly leveraged loans such as mortgage securities; (d) Downey had very little real underwriting, which led to large numbers of bad loans that would cause huge numbers of defaults; and (e) Downey had not adequately reserved for Option ARM loans, the terms of which provided that during the initial term of the loan borrowers could pay only as much as they desired with any underpayment being added to the loan balance.

On November 12, 2008, the Lead Plaintiff filed a Consolidated Amended Complaint against the Defendants.

On July 22, 2008, a notice of motion and motion to consolidate cases was filed. In the following month, minutes stating the order granting Waterford’s motion to consolidate cases was entered on August 15, 2008. Lastly, a consolidated complaint was filed by lead plaintiff Waterford Township General Employees Retirement System on September 30, 2008.

INDUSTRY CLASSIFICATION:
SIC Code: 6035
Sector: Financial
Industry: S&Ls/Savings Banks

COMPANY/ISSUER NAME:	Downey Financial Corporation
COMPANY/ISSUER TICKER:	DSL
COMPANY WEBSITE:	http://www.downeysavings.com

FIRST IDENTIFIED COMPLAINT IN THE DATABASE

Waterford Township General Employees Retirement System, et al. v. Downey Financial Corporation, et al.

COURT: C.D. California	DOCKET NUMBER: 08-CV-03261
JUDGE NAME: Hon. John F. Walter
DATE FILED: 05/16/2008	SOURCE: Notice of Filing
CLASS PERIOD START: 10/16/2006	CLASS PERIOD END: 03/14/2008
TYPE OF COMPLAINT: Complaint (Unamended and Unconsolidated)
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Coughlin Stoia Geller Rudman & Robbins LLP (San Diego) 401 B Street, Suite 1700, San Diego, CA, 92101 (voice) 206.749.5544, (fax) 206.749.9978, info@csgrr.com/ _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 1

DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT
Class Action Complaint For Violation Of The Federal Securities Laws
Type: Complaint		Date on the document: 5/16/2008
Civil Minutes- General
Type: Order		Date on the document: 8/14/2008

REFERENCE COMPLAINT

In Re Downey Securities Litigation

COURT: C.D. California	DOCKET NUMBER: 08-CV-03261
JUDGE NAME: Hon. Judge John F. Walter
DATE FILED: 09/30/2008	SOURCE: Docket
CLASS PERIOD START: 10/16/2006	CLASS PERIOD END: 03/14/2008
TYPE OF COMPLAINT: First Amended and Consolidated
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Coughlin Stoia Geller Rudman & Robbins LLP (Los Angeles) 9601 Wilshire Blvd., Suite 510, Los Angeles, CA, 90210 (voice) 310.859.3100, (fax) 310.278.2148, Coughlin Stoia Geller Rudman & Robbins LLP (San Francisco) 100 Pine Street, Suite 2600, San Francisco, CA, 94111 (voice) 415.288.4545, (fax) 415.288.4534, _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 2

DOCUMENTS FOR THE REFERENCE COMPLAINT
Consolidated Complaint For Violation Of The Federal Securities Laws
Type: Complaint		Date on the document: 09/29/2008
[Corrected] Consolidated Complaint For Violation of the Federal Securities Laws
Type: Complaint		Date on the document: 09/30/2008
US District Court Civil Docket
Type: Docket		Date on the document: 10/2/2008
First Amended Consolidate Complaint For Violations Of The Federal Securities Laws
Type: Complaint		Date on the document: 11/12/2008
Second Amended Consolidated Complaint for Violations of the Federal Securities Laws
Type: Complaint		Date on the document: 04/17/2009
Judgment
Type: Other		Date on the document: 08/27/2009

OTHER DOCUMENTS

Case Name and/or Number:
Type:		Date on the document:

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