CalPERS Acquires Settlement Related to Lehman Investments

The settlement of $12.75 million ends a lawsuit that CalPERS had filed regarding its purchases of Lehman stock and bonds prior to Lehman’s 2008 collapse. CalPERS opted out of a class action against Lehman’s former top executives, directors, Ernst &Young and various underwriters and filed its own action in February 2011 over allegedly false statements about Lehman’s financial condition which caused Lehman securities to trade at artificially inflated prices.

The Ernst & Young settlement comes on top of previous recoveries achieved by CalPERS in this action. The pension fund settled with Lehman’s officers and directors for $11 million in October 2011. CalPERS also settled its claims against two underwriters—Cabrera Capital and Loop Capital Markets LLC—for a total of $4.6 million in June and November 2013.

According to CalPERS, the Ernst & Young recovery is far larger than the recovery it would have obtained had it remained in the class action. The amount paid to CalPERS is equal to nearly 13% of the total amount Ernst & Young paid to settle with the entire class out of which CalPERS opted—a class which included thousands of members with tens of billions of dollars of claimed damages.

Ernst & Young was added as a defendant to other lawsuits against Lehman following a 2,200-page report published in 2010 by Lehman bankruptcy examiner Anton Valukus. Ernst & Young has said its work met all applicable professional standards (see “Former Lehman Exec Asks Judge to Dismiss Suit”).