On May 7, 2009 State-Boston Retirement System, Norfolk County Retirement System, City of Brockton Retirement System, and Arkansas Teacher Retirement System (collectively, the "Public Pension Fund Group") were appointed as Co-Lead Plaintiffs and the District Court approved their selection of Labaton Sucharow LLP to serve as Lead Counsel in In re Colonial BancGroup, Inc. Securities Litigation No. 2:09-cv-00104-MHT-WC (M. D. Ala.). Lead Plaintiffs represent a class of purchasers of Colonial’s securities between April 18, 2007 and January 27, 2009, inclusive (the "Class Period"). The case is pending in the Middle District of Alabama.

The case stems from allegations that, despite the continued softening of the real estate and credit markets in the first half of 2008, Defendants repeatedly assured Colonial investors that the Company had taken the appropriate steps to decrease its exposure to troubled mortgages. On October 22, 2008, Colonial suspended its dividend and announced its third quarter 2008 financial results: a net loss of $71 million due in substantial part to a sharp increase in its nonperforming assets and charge-offs. Colonial’s stock continued to trade at artificially inflated levels as this revelation, along with others made during the remainder of the Class Period, was accompanied by denials and continued misrepresentations by Defendants.

After the market closed on January 27, 2009, Colonial announced its fourth quarter and full year 2008 financial results: a net loss of $825 million for the quarter due in substantial part to a $575 million goodwill impairment charge, a $415 million charge to write off troubled assets and an increase to its loan loss reserve. For the first time, Colonial further disclosed that its receipt of $550 million from the U.S. Treasury’s Troubled Assets Relief Program ("TARP") was conditioned upon the Company raising an additional $300 million in equity. Colonial has been lambasted by analysts and investors for failing to timely disclose this significant TARP contingency.

The Defendants’ Class Period statements were materially false or misleading because, inter alia: the Company was failing to adequately reserve for mortgage-related exposure and failing to write down impaired goodwill, causing its balance sheet and financial results to be artificially inflated; the Company’s exposure to troubled assets was not isolated to its residential construction portfolio, but extended to its other loan portfolios; the Company’s exposure to the problems in the real estate market had not been limited by the actions the Company had taken in 2006, including its decision to tighten its underwriting standards and limit the amount of new loans in certain parts of the state of Florida; and the U.S. Government’s approval to provide Colonial with $550 million in funding as announced on December 2, 2008 was conditioned upon Colonial raising an additional $300 million in capital from outside sources. As a result of Defendants’ false statements, Colonial’s stock has declined precipitously from a Class Period high of $16.06 on February 1, 2008 to $0.85 per share on January 28, 2009.

On May 14, 2010, the Court denied the motions to dismiss the complaint.