Deutsche Bank

Deutsche Bank Securities Unit Must Defend Itself Against Xethanol Corp. Lawsuit Related to Auction-Rate Securities Losses

Published on: July 9, 2008 | by Shepherd Smith Edwards & Kantas, LLP

This week, U.S. District Judge Alvin K. Hellerstein announced that the securities arm of Deutsche Bank AG will have to defend itself against a lawsuit alleging that it lost almost $1.6 million in auction-rate securities.

Xethanol Corp., which filed the securities lawsuit, alleges that Deutsche Bank Securities let the alternative-energy company buy the securities even though it didn’t fulfill the requirements for the transaction to take place as a private investment. Xethanol says it ended up selling its positions in two auction-rate securities at a $1.59 million loss last September. The company claims it acquired the positions for $13.3 million last June.

However, Deutsche Bank Securities says it never interacted directly with Xethanol. A third-party broker bought the securities from Deutsche Bank before selling them to Xethanol. The broker is not named as a defendant in the case.

Deutsche Bank Trust Company, Goldman Sachs Group, and Bank of America Corporation are Among the 21 Lenders Named in Cleveland, Ohio Lawsuit

Published on: January 24, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The city of Cleveland, Ohio is suing 21 financial institutions for hundreds of millions of dollars in damages caused by subprime lending and securitization. The defendants named in the lawsuit are:

• Deutsche Bank Trust Company • Ameriquest Mortgage Company • Bank of America Corporation • The Bear Stearns Companies • Citigroup, Inc.

• Countrywide Financial Corp.

Bear Stearns, Deutsche Bank, and Merrill Lynch Among the Wall Street Firms Subpoenaed by New York Prosecutors

Published on: December 12, 2007 | by Shepherd Smith Edwards & Kantas, LLP

New York Attorney General Andrew Cuomo is subpoenaing several Wall Street firms, including Deutsche Bank AG, Merrill Lynch & Co, and Bear Stearns, for information about packaging and selling debt connect to high-risk mortgages.

Prosecutors want to look at the way investment banks review the quality of mortgages before turning them into packaged products that can be sold to investors. They also want to find out how debt is being turned into securities and learn more about the credit-rating firm-bank relationship.

This past summer, mortgage-backed securities affected by growing default and delinquency rates had high debt ratings despite the backing of loans issued to lenders.

Citigroup, Lehman Brothers, DeutscheBank and other Firms Fined for Failing to Deliver Trade Confirmations.

Published on: October 9, 2007 | by Shepherd Smith Edwards & Kantas, LLP

NYSE Regulation fined 14 of its member firms a total of $10.4 million in fines for failing to deliver trade confirmations to their clients and other violations.

Citigroup Global Markets received the heaviest fine of $2.25 million for failing to deliver trade confirmation documents in more than a million consumer transactions. Lehman Brothers and DeutscheBank were each fined $1.25 million.

Other firms sanctioned included UBS Securities; Bear Stearns & Co.; Credit Suisse Securities (USA) LLC ; Banc of America Securities LLC; Goldman Sachs & Co.; JP Morgan Securities; Wachovia Capital Markets LLC; and Keefe, Bruyette & Woods Inc. Fines levied against these firms ranged from $375,000 to $800,000.

Merrill Lynch Seizes $400 Million of Assets from a Bear Stearns Managed ‘Subprime’ Hedge Fund for Failing to Meet Margin Calls

Published on: June 21, 2007 | by Shepherd Smith Edwards & Kantas, LLP

A hedge fund managed by Bear Stearns that takes both bullish and bearish positions in subprime loans has been hit heavily by conditions in that market. Some of the fund’s assets were held at Merrill Lynch, on margin. When the equity in the fund dropped, Merrill issued margin calls.

The hedge fund reportedly began with about $600 million in investor capital, $40 million of that from Bear Stearns and its executives, then borrowed $6 billion from Wall Street lenders, including Merrill, Goldman Sachs, Bank of America and Deutsche Bank.

As the fund’s assets lost market value, the Bear Stearns managers scrambled to sell hundreds of millions of dollars in assets to satisfy demands for cash and assets from creditors to stave off liquidation of the fund. The managers auctioned almost $4 billion in mortgage bonds, and attempted to present a 30-day plan to sell more assets, but was unable to persuade Merrill to refrain from seizing assets.

A Warning on Risk in Securities backed by Commercial Mortgages

Published on: May 7, 2007 | by Shepherd Smith Edwards & Kantas, LLP

In the wake of the collapse of the subprime residential mortgage market, the leading bond rating agencies are beginning to crack down on what they see as risky lending practices in commercial real estate as well.

Like residential loans, commercial mortgages are pooled and packaged into bonds that are sliced up into portions carrying different degrees of risk. According to Moody’s, there were $769.6 billion in commercial mortgage-backed securities at the end of last year, representing 26.1 percent of all outstanding commercial mortgages, including apartment buildings.

The agencies that rate these securities have issued warnings in the past, but last month they sounded a new note of urgency, saying that for the first time they would adjust their ratings to reflect their concerns.