Neuberger Berman ordered by panel to pay $5.5 million
NEW YORK, July 18 (Reuters) - Fund manager Neuberger Berman and a wealth adviser were ordered by arbitrators to pay roughly $5.5 million to four investors for selling securities backed by Lehman Brothers debt right before the investment bank collapsed.
A FINRA arbitration panel on Friday ruled that Neuberger, which until 2009 has been a unit of Lehman, and Chicago adviser Brian Hahn were responsible for recouping the initial investment of four clients, plus interest and fees, after selling Lehman-backed notes between June and August 2008.
Accounts held by Ira Robb, Edward Leshin, and Leonard and Kimberly Almalech last year asked arbitrators to award them about $30.2 million in actual and punitive damages after Hahn during the summer of 2008 sold them shares in "comBATS" and "XLF Lehman Brothers Structured Notes," Block said.
One of the clients also invested $1 million in Libertyview Credit Select, a Neuberger-managed fund that lent its assets to Lehman. These notes were in fact backed by Lehman bonds.
Lehman filed for bankruptcy a month later, wiping out their value. The investors complained Neuberger failed to adequately disclose that the notes were essentially Lehman debt.
"Our clients had made it clear they didn't want to be involved with anything Lehman. Who would buy Lehman bonds in August 2008?" said one of the investors' lawyers, Alan Block of Chicago law firm Block & Landsman.
With the ruling, Block said the investors received 100 percent of their initial investment, but will return the structured notes to Neuberger. No punitive damages were awarded, Block said.
A Neuberger spokesman declined to comment.
The FINRA panel ordered Neuberger to pay $5 million in damages, $7,500 in legal fees and roughly $450,000 in interest. Neuberger and Hahn also were assessed $14,280 in session fees. Block estimates his clients also will receive $300,000 of interest dating back to the date of purchase.
Lehman's estate sold a majority stake in Neuberger Berman to its employees in May 2009. Neuberger's executives, including CEO George Walker, had been officers at Lehman.
The claimants accused Neuberger Berman of targeting high net worth investors to raise funds for Lehman under the form of principal protected notes. Block said Neuberger did not sell many of these products, but that Hahn marketed these kinds of notes to his clients.
"These products were created for these clients. They were custom made," Block said.
Principal Protected Note - News
The claimants accused Neuberger Berman of targeting high net worth investors to raise funds for Lehman under the form of principal protected notes. Block said Neuberger did not sell many of these products, but that Hahn marketed these kinds of notes to
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$5 Million Principal Protected Note Lehman Brothers Structured ...
CHICAGO, July 18, 2011 /CHICAGOPRESSRELEASE.COM/ — The following was released today by The Iavarone Law Firm and Block & Landsman: On July 15, 2011, A FINRA arbitration panel in Chicago, IL awarded damages of $5 million against Neuberger Berman and it’s broker Brian Hahn in connection with the sale of Lehman Brothers structured products to three high net worth customers, two from California and one from Illinois. The investors were represented by Nicholas P. Iavarone ( www.iavaronefirm.com ) and Alan F. Block ( www.block-landsman.com ) who jointly represent customers in disputes with the securities industry.
According to Mr. Iavarone and Mr. Block, in the summer of 2008, Neuberger Berman wealth manager Brian Hahn solicited the customers to invest in the comBATS and XLF Lehman Brothers Structured Notes. One of the customers had also invested $1 million in Libertyview Credit Select, a Neuberger Berman private equity hedge fund that hypothecated its assets to Lehman Brothers. “The customers were all told that the principal of the structured notes were either fully protected or partially protected. Neither Neuberger Berman or Brian Hahn adequately disclosed the fact that the investments were actually Lehman Brothers debt instruments and not investments in the underlying indices,” said Mr. Iavarone. “The marketing of Lehman Brother structured notes targeted investors,” Mr. Iavarone continued, “Especially high net worth individuals, in an effort to raise funds for Lehman Brothers under the guise of principal protected notes. When Lehman Brothers declared bankruptcy, the value of the structured notes became virtually worthless.”
“The award represents 100% of the money the clients invested in the Lehman Brothers Structured Notes and in Libertyview Credit Select hedge fund,” according to Mr. Block. Mr. Block stated that Dr. Craig McCann of SLCG Securities Litigation and Consulting Group ( www.slcg.com ) testified at the hearing that the structured products were unsuitable and worth substantially less than the price at which they were sold in the offerings because of Lehman’s extraordinary credit risk in 2007 and 2008.
If you have any questions concerning this notice, please contact: Nicholas P.
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