NEW YORK, June 9, 2008 (LAWFUEL) — Labaton Sucharow LLP filed a
class action lawsuit on June 6, 2008 in the United States District
Court for the Northern District of California, on behalf of persons who
purchased the securities of Wachovia Corp. (NYSE:WB) (“Wachovia” or the
“Company”) between May 8, 2006 and April 11, 2008, inclusive (the
“Class Period”). The complaint names Wachovia, G. Kennedy Thomson
(former CEO), Thomas J. Wurtz (CFO) and Donald K. Truslow (Chief Risk
Officer) as defendants (collectively, “Defendants”). The complaint
alleges that during the Class Period Defendants violated Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934 by issuing various
materially false and misleading statements about Wachovia’s financial
results and business operations, which had the effect of artificially
inflating the market price of the Company’s securities.
You can view a copy of the complaint online at
http://www.labaton.com/en/cases/Newly-Filed-Cases.cfm or obtain it from
the Court. The case number is C-08-02844 SC, and the Judge presiding
over the case is the Honorable Samuel Conti.
In summary, the complaint alleges that Defendants misled investors by
falsely representing that Wachovia had strict and selective
underwriting and loan origination practices and a conservative lending
approach that set it apart from other lenders. Such reassurances were
repeated by defendants throughout the Class Period in order to
artificially support Wachovia’s stock price in the midst of a weakening
mortgage market. In response to increased market concern with the
mortgage lending industry, and Wachovia’s option ARMs in particular,
Wachovia falsely represented that its loan underwriting practices were
much better than at other banks and that this would allow it to prosper
while lenders with less exacting standards and procedures would fare
much worse. In reality, Wachovia’s actual lending practices differed
materially from the description of those practices in statements made
to investors. The Company’s ability to weather the deterioration in the
real estate and credit markets was grossly exaggerated by Defendants,
at precisely the worst time, when analysts began to ask tough
questions. The Company, moreover, had inadequate loan loss reserves and
falsely represented that its capital position was sufficient to fund
its dividend.
Shortly after last assuring the market of its liquidity, the strength
of its underwriting practices, and the adequacy of its reserves,
Wachovia reported a surprise quarterly loss, undertook emergency
measures to increase capital, and cut its dividend. On April 14, 2008,
before the open of ordinary trading, Wachovia reported a loss of $350
million, or $0.20 per share, for the first quarter of 2008. The Company
attributed the results to: (1) a $2.8 billion increase credit loss
reserves, including $1.1 billion specifically for “Pick-A-Pay” reserve
build, the lending program highly touted by the Company during the
Class Period. The need to increase Pick-A-Pay reserves was attributed
to Wachovia’s adoption of a “refined reserve modeling” that resulted in
“higher than expected loss factors on Pick-a-Pay”; and (2) $2 billion
in mark-to-market losses for mortgage backed securities, including a
“$729 million loss on unfunded leveraged finance commitments.” In order
to shore-up its capital, Wachovia announced the following steps: (1)
reduce the dividend 41% to $0.375; and (2) plan to raise capital by
$7-8 billion through public offerings.
In reaction to the news, shares fell from $27.81 to $25.55 (8.13%) on
abnormally high volume.
Plaintiff is represented by the law firm of Labaton Sucharow LLP, which
has been representing plaintiffs in securities class actions for over
40 years.
If you bought Wachovia securities between May 8, 2006 and April 11,
2008, inclusive, you may qualify to serve as Lead Plaintiff. Lead
Plaintiff papers must be filed with the court no later than August 8,
2008. If you would like to consider serving as lead plaintiff or have
any questions about the lawsuit, please contact one of our
representatives or Andrei V. Rado, Esq. of Labaton Sucharow, at
800-321-0476. A lead plaintiff is a court-appointed representative
party that acts on behalf of absent class members. You do not need to
be a lead plaintiff in order to share in any recovery that may result
from this litigation. You can share in a recovery as an absent class
member by filing out claim forms that will be made available at the
appropriate time.
