COLCHESTER, Conn., Aug. 3, 2007 LAWFUEL – The Litigation Newswire — On August 2, 2007, Scott+Scott, LLP filed a class action against American Home Mortgage Investment Corp. (“American Home Mortgage” or the “Company”) (NYSE:AHM) and certain officers and directors in the U.S. District Court for the Eastern District of New York. The action is on behalf of American Home Mortgage common stock purchasers during the period July 26, 2006, through July 27, 2007, inclusive (the “Class Period”), for violations of the Securities Exchange Act of 1934. The complaint alleges that defendants made false and misleading statements and material omissions regarding the Company’s business and operations and that, as a result, the price of the Company’s securities was inflated during the Class Period, thereby harming investors.
If you purchased American Home Mortgage stock during the Class Period and wish to serve as a lead plaintiff in the action, you must move the Court no later than 60 days from today’s date. Any member of the investor class may move the Court to serve as lead plaintiff through counsel of its choice, or may choose to do nothing and remain an absent class member. If you wish to discuss this action or have questions concerning this notice or your rights, please contact Scott+Scott ([email protected], 800/404-7770, 860/537-5537) or visit the Scott+Scott website, http://www.scott-scott.com, for more information. There is no cost or fee to you.
According to the complaint, during the Class Period, defendants made false and misleading statements regarding the Company’s quarterly financial results and profits, in active concealment of the true extent of the growing level of loan delinquencies and resulting adverse impact on the quality of the Company’s collateralized debt obligations (CDOs), earnings and profits. Specifically, Plaintiff alleges that defendants actively concealed the growing inability of American Home Mortgage to make timely payments on its CDOs and to securitize its loans, caused in part by the declining quality of its loan portfolio; and that the Company failed to incur necessary asset impairment charges, to adjust downward the value of its loan portfolio.
According to the allegations, rather than disclose the truth of these matters, defendants were upbeat in the assessment of the Company’s performance. As late as June 28, 2007, as facts regarding substantial impacts to the Company’s discontinued products and loan portfolio began to leak out, the Company stated that it could rely on its “substantial reserves” to contain any foreseeable losses and that it was expected that “total stockholder’s equity will actually be higher at the end of the second quarter compared to the first quarter of 2007.” On the startling news of June 28, 2007, the price of American Home Mortgage stock tumbled 12.1%, closing at $18.38 per share.
Following this, on July 27, 2007, the Company announced that it would suspend payment of its coveted quarterly dividend, admitting that it was aware of “major write-downs of its loan and security portfolios.” The shocking news awaited a resumption of trading in the stock — once trading was resumed on July 31, 2007, the price of American Home Mortgage stock plunged $9.43 or 90%, closing at $1.04 per share, on heavy volume of over 31.3 million shares, for an overall loss of more than $1.7 billion in total market value.
Numerous questions remain about the failure of risky mortgage-based collateralized debt obligations issued by American Home Mortgage and others and their impact on the financial markets. The Street.com recently commented that skeptics view the issuance of risky “BB” to “BBB” rated CDOs notes as akin to “putting horse dung and other garbage into a grinder to make some sausage.” Indeed, reported losses now range from $95 million in equity exposure to American Home Mortgage CDOs at RAIT Financial Trust (NYSE:RAS) to over $1.6 billion in losses to funds managed by Bear Stearns Co., Inc. (NYSE:BSC).
The plaintiff is represented by Scott+Scott, a firm with significant experience in prosecuting investor class actions. Please visit our website at www.scott-scott.com for current information on the litigation of major securities, antitrust, employment and employee retirement plan actions throughout the United States, including information on the recent landmark decision to certify a class action for the benefit of present and former UPS employees, dating back to May 2000, who were precluded from returning to work due to medical reasons and the firm’s recent $80 million settlement on behalf of class members in a securities case against Priceline.com. The firm represents pension funds, charities, foundations, individuals and other entities worldwide.
More information on this and other class actions can be found on the Class Action Newsline at http://www.primenewswire.com/ca/