B of A, Citi Named in Securities Suit

Bank of America Corp. and Citigroup Inc. are among the underwriters accused in a lawsuit of misleading investors in a $1.9 billion offering of Lehman Brothers securities in February.

The suit, filed Wednesday in the U.S. District Court for the Southern District of New York by Fogel Capital Management of Stuart, Fla., also names Merrill Lynch & Co. Inc., a UBS AG unit, and Lehman executives, including chief executive officer Richard Fuld. Fogel Capital is seeking class, or group, status and asking for unspecified damages.

"Lehman's prospectus contained both material misstatements and omissions," said the New York law firm Wolf Haldenstein Adler Freeman & Herz, which is representing Fogel Capital. Lehman did not disclose that it had failed to set aside enough money to cover losses on securities backed by subprime mortgages, the law firm said.

Lehman sold $1.89 billion of perpetual preferred shares, its biggest ever issuance of the security, on Feb. 5, according to data compiled by Bloomberg.

The New York investment bank, which made the largest bankruptcy filing in history last week, is not named in the complaint. It is shielded from lawsuits under the Bankruptcy Code's automatic stay as it repays creditors.

Perpetual preferred shares have no maturity date and pay their stated dividends into perpetuity.

Doug Morris, a UBS spokesman, did not immediately return a call for comment. Michael Hanretta, a Citi spokesman, had no immediate comment. Shirley Norton, a B of A spokeswoman; Mark Herr, a Merrill spokesman; and Mark Lane, a Lehman spokesman; all declined to comment.

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