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NJ sues Lehman, Ernst for lost pension millions

New Jersey blew millions in taxpayer-backed pension funds on risky investments in Lehman Bros. near its end. Someone should pay. Why not the defunct investment bank's insurers, says Gov. Corzine.

Philadelphia-based Berger & Montague, lawyers, are helping New Jersey try to collect some fo the money it lost when Lehman Bros. blew up. But Lehman's bankrupt! No matter; they were insured, so were their accountants, and their board...

"The state of New Jersey has filed suit against top executives and members of the board of directors of bankrupt Lehman Brothers Holdings Inc., charging that misrepresentations by the company led the Division of Investment in the Department of Treasury to purchase $182 million in Lehman securities in April and June 2008 that resulted in an estimated $118 million in losses, Governor Jon S. Corzine announced today. The state also sued Lehman's long-time accountants Ernst & Young."

NJ says its investments in Lehman "were based on financial statements and materials that contained material misstatements and omissions regarding the value of Lehman’s assets that the Division of Investment could not have known were false...  Executives from Lehman had disavowed to representatives of the Division of Investment the company’s exposure to the collapsing real estate market and had claimed that Lehman had sufficient liquidity, a strong capital base and superior hedging, risk management and valuation... Lehman executives knew, or should have known, that Lehman’s overvalued residential and commercial real estate portfolio was making it increasingly illiquid.

"Lehman filed for bankruptcy on Sept. 15, 2008, leaving shareholders with virtually worthless stock... 
Executives and former executives sued are Richard Fuld Jr., chairman and chief executive officer" and other members of Lehman's executive committee, plus directors. 
"Lehman originated mortgages, purchased mortgages, packaged mortgages into securities, and marketed the securities to investors. The firm made substantial investments in non-prime residential mortgages. One of its subsidiaries, Aurora Loan Services, permitted loans for the full value of property to people with low credit scores, according to the suit. The company also aggressively invested in high-risk commercial properties...
 
"The suit was filed for the state by Pearl S. Pearlman and Jeffrey W. Herrmann of Cohn Lifland Pearlman Hermann & Knopf, a Saddle Brook law firm; and Merrill G. Davidoff, Lawrence Lederer, Robin Switzenbaum and David Anziska of Berger & Montague, a Philadelphia law firm."
 
A copy of the complaint is available on-line at www.nj.gov/oag/newsreleases09/031709-nj-v-fuld.pdf.