Securities Lawsuit Targets Auction Rate Securities Investor

Securities Lawsuit Targets Auction Rate Securities Investor - 3/12/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

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Securities Lawsuit Targets Auction Rate Securities Investor
Kevin LaCroix

The D & O Diary. March 12, 2009
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EXCERPT: Last year, investors filed numerous lawsuits against the investment banks and broker dealers who sold the investors auction rate securities. However, in a recent lawsuit, the targeted company was not an auction rate securities seller; rather, it was an auction rate securities buyer, which is alleged to have misrepresented to its own shareholders its exposure to auction rate securities in which it had invested. According to their March 11, 2009 press release, the plaintiffs’ attorneys have initiated a securities class action lawsuit in the Southern District of New York against Perrigo Company, a Michigan-based pharmaceutical manufacturer and distributor, and certain of its directors and officers. The complaint alleges that Perrigo had invested in $18 million in auction rate securities and that until September 15, 2008, the company had a reasonable expectation of redeeming its auction rate securities. However, the complaint alleges that on September 15, Lehman Brothers, which had underwritten and sold Perrigo’s auction rate securities, went bankrupt. The complaint alleges that on November 6, 2008, the beginning of the Class Period, defendants reported the "fair value" of Perrigo’s ARS as $14,500,000, but concealed the impact of Lehman’s bankruptcy on Perrigo’s ARS. Then just three months later, on February 3, 2009, defendants disclosed, for the first time, that Lehman had underwritten and sold the ARS to Perrigo. They also announced that the Company was writing off the entire value of its ARS, wiping out over a third of Perrigo’s earnings in the quarter. As a result of this disclosure, the stock price plunged 18% that day, causing massive losses to investors. Although the allegations brought against Perrigo as an auction rate securities investor may seem unusual, the Perrigo complaint is actually not the first to assert securities fraud in connection with a company’s disclosures concerning its investment in auction rate securities.

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