Lehman Brothers Lawsuit to be Filed by California County

San Mateo County, California, has indicated they intend to file a lawsuit against Lehman Brothers’ top officers for making false and misleading statements about the investment bank’s financial position during the weeks leading up to a bankruptcy filing on September 15, 2008.

As a result of the Lehman Brothers collapse, the county lost approximately $150 million from their $2.6 billion investment pool, which has impacted schools, cities and other special districts that contributed to the fund.

The San Mateo County’s Board of Supervisors voted this week in favor of retaining a financial fraud law firm on a contingency fee basis to file the Lehman Brothers lawsuit, which means that there will not be any attorney fees unless they are successful obtaining a recovery from the former executives.

The Lehman Brothers bankruptcy, which was the largest filing in U.S. history, was caused by the sub-prime mortgage crisis that the investment back helped create.

While the county has already filed a claim along with other creditors in New York bankruptcy court, seeking its share of the investment bank’s estate, a separate lawsuit should be filed next week against former Lehman Brothers officers Richard Fuld, CEO, Joseph Gregory, COO, Thomas Russo, executive Vice President and chief legal officer, and Erin Callan, former CFO and global controller.

The Lehman Brothers lawsuit will allege that the executives are equally responsible for San Mateo County’s losses for making misleading statements that they relied on prior to the bankruptcy. Indications were made that the bank was adequately capitalized, which is now known to be false.

Last month, a Lehman Brothers class action lawsuit was filed against the former executives and other firms who underwrote a offering of Lehman Preferred Series “J” stock shares in February 2008. The lawsuit alleges that false and misleading statements were made about the financial strength of the investment bank at the time the offering was made, months before the bankruptcy.

A number of individual investors who purchased stock of Lehman structured notes during the months before the bankruptcy based on recommendations of their broker, are also pursuing claims to recover their losses. Lehman Brothers fraud lawyers have indicated that investors may be able to recoup losses caused by overconcentration on investment bank funds, unsuitable investment recommendations and misrepresentations about the financial position of Lehman Brothers.