Skip to main content

Pennies on the Dollar for Lehman Principal Protection Notes

In what could become just the tip of a legal iceberg for UBS, Lehman Brothers and others over sales of Lehman Principal Protection Notes, a class-action lawsuit has been filed in the United States District Court for the Southern District of New York. Among the claims that the plaintiff, Stephen P. Gott, alleges: UBS, Lehman and officers and executives of both companies intentionally misstated key facts to investors about the Lehman Principal Protection Notes, as well as omitted information regarding certain risks.

The complaint further contends that UBS marketed and sold Lehman Principal Protection Notes as an investment suitable for investors who wanted to protect their entire principal investment. When Lehman Brothers filed for bankruptcy on Sept. 15, 2008 it subsequently defaulted on many of the notes. As a result, investors now face the distinct possibility of losing all or a substantial part of their investments.

On page nine of the complaint, which was formally filed Nov. 6, the plaintiff also asserts that Lehman Brothers actually used proceeds from the Principal Protection Notes for its own general business purposes, including funding other corporate operations that were suffering financially.

In addition to UBS, Lehman Principal Protected Notes were marketed and sold by several other brokerage firms, including Citigroup, Merrill Lynch and Wachovia. In each instance, the notes were touted as “conservative” investments. In reality, however, they were structured products that combined fixed-income investments with derivatives, leaving investors looking for conservative investments open to considerable – and unexpected – risk.

For these investors, Lehman Principal Protection Notes and their so-called advertised benefit of 100% principal protection translate into pennies on the dollar. Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.