The investment bank UBS AG has agreed to pay $120 million to settle a class action lawsuit alleging it duped small-time investors into buying now-worthless notes issued by Lehman Brothers Holdings. Plaintiffs counsel Girard Gibbs unveiled the proposed settlement in a brief filed on Thursday in U.S. district court in Manhattan. The settlement, which must be approved by Southern District Judge Lewis Kaplan (See Profile), would resolve securities claims brought on behalf of investors who purchased about $900 million in Lehman-issued notes sold by UBS between April 2007 and June 2008.
The case relates to a structured product that Lehman and other banks referred to as "principal-protected notes." UBS stockbrokers sold the Lehman-issued notes to investors in 2007 and early 2008. They lost their value after Lehman's sudden September 2008 collapse. When an issuer goes bankrupt, holders of structured notes are put at the back of the line with other unsecured creditors.
