NEW YORK (August 1, 2016) – Labaton Sucharow LLP announced today that the Firm reached a settlement of $14,050,000 on behalf of lead plaintiff Oklahoma Police and Pension Retirement System against defendants Fifth Street Finance Corp. (FSC), Fifth Street Asset Management, Inc. (FSAM), and certain of FSC’s directors and officers who also founded, owned, and/or held senior positions at FSAM, in In re Fifth Street Finance Corp. Securities Litigation, No. 15-cv-7759, in the United States District Court for the Southern District of New York.
Led by partners Joel H. Bernstein and Ira A. Schochet, with assistance from associates Eric D. Gottlieb and Corban S. Rhodes, the lead plaintiff alleged that, from July 7, 2014 through February 6, 2015, certain FSC directors and officers engaged in a fraudulent scheme to artificially inflate FSC’s assets and investment income in order to increase FSAM’s revenue and valuation in the lead up to its initial public offering in October 2014. The defendants are alleged to have accomplished this by: (1) heavily investing FSC in increasingly risky and speculative investments, undermining the credit quality of FSC’s investment portfolio; (2) delaying the write-down of impaired investments and the placement of impaired investments on non-accrual status in order to create the appearance of increasing revenues for FSC and FSAM; and (3) systematically overstating the income generated by FSC’s investments and the fair value of its portfolio, all while providing investors with a false impression of FSC’s financial performance, investment quality, and outlook.
On July 27, 2016, a settlement was reached, subject to the lead plaintiff’s completion of additional discovery and to court approval.