June 9, 2008
Labaton Sucharow LLP Announces Filing of Securities Class Action Lawsuit Against Wachovia Corp.
NEW YORK (June 9, 2008) – 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. (“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’ 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 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.
More information about Labaton Sucharow is available at www.labaton.com.