A Virginia bankruptcy court is considering a proposed $14.3 million settlement to be paid by SunTrust Banks Inc. over its sale of auction rate securities to LandAmerica 1031 Exchange Service Inc. (“LES”), according to Hilary Russ’s Law360 article entitled “$14.3M Deal Ends LandAmerica, SunTrust ARS Dispute.”
The claims against SunTrust arose out of LES’ purchase of auction rate securities. LES facilitated tax-free 1031 exchanges whereby gains from the sale of one property are used to purchase a replacement property. In the interim, LES invested the proceeds in supposedly safe auction rate securities that were tied to pools of student loans.
SunTrust sold the auction rate securities to LES, representing them to be safe, liquid, cash-equivalent, short-term parking places for money, according to the article. They were not.
The $330 billion market for auction rate securities froze in February 2008 when market makers withdrew their support for these securities amid their growing panic over the widening subprime crisis. As a result, LES (among many others) was left holding financial instruments it could not sell for anything like what it paid for them, and was unable to return deposits to customers, according to the article.
A number of lawsuits have been filed by regulators and on behalf of private investors against banks for misrepresentations and omissions of material facts in connection with sales of auction rate securities.
The case is In re: LandAmerica Financial Group Inc. et al., case number 3:08-bk-35994, in the U.S. Bankruptcy Court for the Eastern District of Virginia.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. Page Perry’s attorneys have extensive experience in representing investors in auction rate securities cases. For further information, please contact us.