|  | | 2010 News and Press Releases | | |
SETTLEMENT NEWS:
Why Ambac's Subprime Securities Suit Settlement is Noteworthy
Kevin LaCroix
The D & O Diary. December 17, 2010
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EXCERPT: In its December 15, 2010 filing of Form 8-K, Ambac Financial Group announced that it had entered a memorandum of understanding to settle the subprime-related securities class action lawsuits pending against the company and certain of its directors and officers for a payment of $27.1 million, of which $24.6 million is to be paid by the company’s D&O insurers. The settlement is interesting in and of itself, but it is also interesting for the perspecAtive it provides on the mountain of remaining unresolved subprime and credit crisis-related securities suits, as discussed below. […] The plaintiffs’ allegations in the case largely related to the company’s provision of insurance coverage for collateralized debt obligations. The plaintiffs allege, among other things, that the defendants failed to disclose that the company lacked internal controls sufficient to ensure that the company’s standards for underwriting CDOs were adequate, and that the company had a far greater exposure to CDO-related losses and defaults than the company had previously disclosed. In addition to the consolidated securities case, a separate securities suit was filed in December 2008 in the Southern District of New York against Ambac and certain of its directors and officers on behalf of invertors in the company’s Structured Repackaged Asset-Backed Trust Securities (STRATS), as reflected here. The STRATS lawsuit, which proceeded separately from the consolidated case, alleged that the defendants had issued false and misleading statements concerning Ambac’s financial results and operations. On February 22, 2010, Southern District of New York Naomi Reice Buchwald granted in part and denied in part the defendants’ motion to dismiss in the consolidated securities case. As I noted in a prior post discussing the dismissal motion ruling, Judge Buchwald’s decision was particularly noteworthy for her rejection of defendants’ attempts to argue that the company’s woes were not the result of fraud but rather were the result of the global financial meltdown… |
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