According to a press release dated April 23, 2003, Judge Gerard Lynch of the United States District Court for the Southern District of New York granted the motion of Allied Capital, William Walton, and Penni Roll to dismiss the consolidated complaint for failure to state a claim upon which relief may be granted. Judge Lynch ruled that "(t)here is simply no basis (in the Complaint) on which to infer that Allied's valuation of its investments was in fact incorrect or inflated, and thus no basis to infer that Allied's accounting policies resulted in fraudulent overvaluation." He further held that "(s)ince Allied's actual valuation policies were public, as was all adverse information about the companies in which Allied had invested, plaintiffs have not alleged that Allied concealed any facts from its investors." In addition, the judge held that plaintiffs had not properly pled that any alleged overvaluation was material. The Court therefore dismissed the case in its entirety.

The lawsuits filed against this company were consolidated into a single proceeding captioned In re Allied Capital Corp. Securities Litigation, 02 CV 3812. The consolidated complaint does not include Arthur Andersen LLP as a named defendant or assert any state law claims against the remaining named defendants.

The original complaint alleged that defendants misstated the value of Allied Capital's investments in companies including, inter alia, Velocita Corp. and Loewen Group, Inc. in Allied's public filings with the SEC and otherwise as a result of failing to "mark to market" or record write-downs of investments that had substantially declined in value long after it had become apparent that such investments were being carried on Allied's books at values vastly higher than their true values. The complaint further alleges that Allied Capital misstated its total assets in its financial statements by carrying Allied's investments including Velocita Corp. and Loewen Group, Inc. on Allied's balance sheet at unrealistically and misleadingly high values. The complaint further alleged that Arthur Andersen, LLP violated the federal securities laws by certifying Allied's financial statements and by allowing its unqualified opinion to be incorporated by reference into Allied's filings with the SEC after it was readily apparent that investments on Allied's balance sheet, including Allied's investments in Velocita Corp. and Loewen Group, Inc., were being carried at unrealistically and misleadingly high values. When the foregoing was revealed to the market on May 16, 2002, the complaint alleged, Allied's share price plummeted from its opening price of $26.44 to as low as $20.00 before closing at $23.20.