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UBS Lehman Brothers: What Did They Know—and When?

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New York, NYMore often than not, in the complex legal world, it is not what you know, but when you knew it that can get you in hot water. The withholding of important information at the worst possible time can have a devastating affect, as is alleged by investors who purchased UBS Lehman Principal Protected Notes prior to the collapse of the once-proud bank in 2008.

What's more, various awards against UBS as the result of the filing of a UBS lawsuit have been at full value—indicating that jurists weighing the claims of plaintiffs are of the view that the alleged deception was so complete, that plaintiffs were entitled to the full value of their losses.

Globe Newswire reported back in the fall that UBS Lehman structured notes effectively supplied the struggling Lehman Brothers bank with a vital infusion of cash at a time when it was desperately trying to stay afloat. Plaintiffs in various actions against UBS claim that investors were led to believe the products were principle protected, when in actual fact, they were not.

To that end, investors claim that UBS fed misleading information to brokers and financial advisors that spoke to the safety and security of the notes. In reality, they were anything but safe and secure. When the unthinkable happened and Lehman Brothers failed, investors holding UBS Principal Protected Notes through Lehman Brothers were left with nothing. The sad truth was that products believed to be an excellent risk (in fact, with the principle protected, risk-free) were found to be rife with risk.

Investors claim that had they known the products were not secure and were not in reality what they were represented to be, they would never have made the investment in spite of the heritage and size of Lehman Brothers.

Plaintiffs alleging UBS fraud claim that UBS had full knowledge of the precariousness of the Lehman Brothers situation, yet continued to push through brokers and financial advisors the various products related to Lehman—including Lehman principal protected notes and reverse convertible notes known to UBS as Yield Optimization Notes.

It has also been alleged that while all this was going on, UBS was making collateralized, short-term loans to Lehman Brothers at high interest to help the bank stay afloat. Thus, the allegation claims, UBS was reaping financial rewards by propping up the beleaguered bank (with full knowledge of its precarious state, it is alleged), while at the same time pushing investments that were exposing investors to significant risk.

Hence, the spate of litigation with regard to UBS investments and alleged Lehman Brothers fraud in this matter.


UBS Lehman Principal Protected Notes Legal Help

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Posted by

As if, the chess games, are not played backwards; from a win, to a win; no matter what other moves are made, in the hokey money charade... The bottom line is... Show me the money, and, that'll name the crooks, opportunists, embezzlers, extortionists, and, other slithering, reptiles... Edgrrr... Stalag Skew, Schizofornia....

Posted by

For the financial industry, the news of the insolvency of Lehman Brothers came as no surprise. What may have been surprising was the fact that Lehman was not rescued by the American government.

As early as July 2007, a Bloomberg article stressed the discrepancy between ratings based on published financial statements and ratings relying on the prices of credit default swaps (the prices a bank has to pay to insure the debts of its creditors) and concluded that Lehman traded as Junk and was – with a rating of Ba1 – below the investment grade. In September 2007, the Financial Times predicted that Lehman Brothers would be among the hardest hit because of its heavy exposure to US mortgage-backed securities. Doubts were being raised about the valuation of so-called level 3 assets using unobservable inputs, a method Warren Buffet called marking to myth. Also the reduction in the value of some of Lehman’s own structured note debt, which was treated as a profit, was criticised in a Financial Times article. In March 2008, credit default swaps for Lehman Brothers climbed to 400 basis points. For issuers, 10 to 20 basis points are considered normal. As far back as spring 2008, the costs for a 5 year credit default swap for Lehman were 20 to 40 times higher and therefore outside any normal range, which must have sounded alarm bells. Already in June 2008, Lehman was desperately looking for capital. Its CFO Erin Callan, who was hired by Credit Suisse one month later, announced, that she had succeeded in raising 6 billion US$ of fresh capital, prompting Reuters to state, that this was insufficient to solve Lehman’s problems. On 3 July 2008, CNN-Money published a report entitled How Lehman lost its way. The venerable Wall Street firm once looked like it would escape the worst of the credit crisis. Now there's talk of a Bear Stearns-like collapse – or a sale. In August 2008, Lehman began a hectic, yet unsuccessful search for capital in Asia, as the financial media reported. At the beginning of September, after the negotiations about a possible stake of the Korea Development Bank in Lehman had failed, there were mounting reports about a further downgrade of Lehman Brothers – Standard & Poor’s had already lowered its rating of Lehman at the beginning of June 2008 – or even a bankruptcy. At the end of August and beginning of September, the credit default swaps for Lehman Brothers climbed temporarily to 790 basis points.

While all this was going on, UBS in the US and Credit Suisse in Switzerland were eagerly selling 100% principal protected Lehman notes to retail investors, promising them: You're not taking any risk. In the worst of cases, you'll get 100% of your money back. Your investment is FULLY principal protected.

Let's hope that justice will one day prevail in both the US and Switzerland.


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