Lehman Brothers settled a lawsuit filed by Florida Attorney General Bill McCollum claiming the firm helped finance predatory lending by the defunct First Alliance Corp. of Irvine, Calif.
The suit, filed in a Florida state court in 2003 on behalf of borrowers who accused First Alliance of charging excessive fees to customers with credit problems, sought $30 million of fines and penalties.
Lehman, which had provided lines of credit and bundled First Alliance's home loans for sale as securities, revealed the settlement in a quarterly filing Monday with the Securities and Exchange Commission.
The securities firm did not disclose the amount of the settlement.
The suit was filed a week before a federal jury in Santa Ana, Calif., found Lehman liable for $5.1 million for its role in helping First Alliance defraud customers. That verdict, later upheld by an appeals court, was the first in which a securities firm was found liable for aiding fraud through business dealings with a lender.
Sandi Copes, a spokeswoman for Mr. McCollum, said Lehman agreed to reform its financing practices and reimburse the Attorney General's Office for the cost of its investigation.
She said she did not know whether Lehman paid fines or penalties.
A spokeswoman for Lehman Brothers, Tasha Pelio, would not discuss the settlement.
