The original class action Complaint alleges Allied Capital Corporation is a principal investment firm specializing in buyouts, acquisitions, recapitalizations, note purchases, growth capital, and middle market investments. The firm also provides debt financing in the form of senior loans, second lien debt, subordinated debt, and unitranche facilities. The Company' Business Loan Express (BLX) subsidiary originates, sells and services primarily real estate-secured small business loans, and also provides small business loans which are guaranteed pursuant to the U.S. Small Business Administration's (SBA) Section 7(a) Guaranteed Loan Program. BLX is Allied Capital's second largest portfolio company, and in 2005 BLX provided approximately 10.0% of Allied Capital's total interest and related portfolio income. Throughout the Class Period, Defendants failed to disclose, among other things, that Allied Capital's BLX subsidiary fraudulently procured and provided SBA-backed Section 7(a) loans to borrowers who were ineligible to receive such loans. As a result, Defendants misrepresented and failed to disclose to investors material adverse facts concerning Allied Capital's financial condition and prospects.

According to the Company’s FORM 10-Q for the Quarterly Period Ended June 30, 2009, on February 26, 2007, Dana Ross filed a class action Complaint in the U.S. District Court for the District of Columbia in which she alleges that Allied Capital and certain members of management violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Thereafter, the court appointed new lead Counsel and approved new lead Plaintiffs. On July 30, 2007, Plaintiffs served an amended Complaint. Plaintiffs claim that between November 7, 2005, and January 22, 2007, Allied Capital either failed to disclose or misrepresented information about its portfolio company, Business Loan Express, LLC. Plaintiffs seek unspecified compensatory and other damages, as well as other relief. The Company believes the lawsuit is without merit, and intends to defend the lawsuit vigorously. On September 13, 2007, the Company filed a motion to dismiss the lawsuit. A hearing was held on the motion to dismiss in April 2009.

On November 10, 2009, Judge Jack D. Shanstrom granted the Defendants’ motion to dismiss the Plaintiff's First Amended Complaint. Judgment was entered in favor of the Defendants.