New Jersey yesterday filed suit against top Lehman Brothers Holdings Inc. executives and board members over claims that company officials misled the state's pension fund into making investments that cost the retirement program $118 million in losses.
State officials are looking to recoup the $118 million as well as incidental and punitive damages, and costs and legal fees,
"With this suit we intend to hold Lehman executives and directors accountable for the fraud and misrepresentation that caused more than $100 million in losses to New Jersey's pension funds," Gov. Jon Corzine said in a press release.
State Attorney General Anne Milgram's office filed the lawsuit in Mercer County Superior Court.
The state's Division of Investment, which oversees New Jersey's $59.2 billion pension investment pool, purchased $2 million in preferred stock on April 1 and roughly $120 million of common stock at $28 per share and $60 million in preferred stock on June 12.
The investments were made based on financial documents and materials that Milgram said contained misstatements and omissions pertaining to the value of Lehman's assets. The company filed for bankruptcy on Sept. 15.
"At no time during the summer did Lehman or its senior executives disclose the truths concerning Lehman's imperiled liquidity and capital position, or the true value of its illiquid assets," according to the complaint.
"Lehman, its top executives, and E&Y either knew or should have known of Lehman's false balance sheet and impaired liquidity and capital positions by the time of the April and June offerings. Nevertheless, none of this was disclosed to [state officials] despite the fact that the Division also had direct communications with senior Lehman executives," the complaint said.
Cohn Lifland Pearlman Herrmann & Knopf LLP of Saddle Brook, N.J., and Berger & Montague PC of Philadelphia are representing the state in its suit.
