SunTrust Sued for Allegedly Misleading Investors
Law firm Berger & Montague PC has filed a class-action lawsuit in the Northern District of Georgia against SunTrust Bank for allegedly misleading its investors.
According to the law firm, which specializes in securities fraud litigation, the suit charges that SunTrust consummated an initial public offering after releasing a false and misleading registration statement, selling 27.6 million units of the securities at $25 per share for proceeds of more than $690 million. The registration statement incorporated SunTrust's financial results for 2007 and Form 8-K dated Feb. 12, 2008.
In November 2008, SunTrust received $3.5 billion in funds from the Troubled Asset Relief Program and an additional $1.4 billion in December 2008. Then in January 2009, when SunTrust released its earnings for the fourth quarter of 2008, the company reported its first quarterly loss in at least two decades, cut its quarterly dividend to 10 cents per common share from 54 cents and announced a significant increase in its provision for loan losses. When this became public, the price of the securities declined significantly. According to the complaint, the registration statement omitted SunTrust's assets, including loans and mortgage-related securities were impaired to a greater extent than the company had disclosed. In addition, the defendants failed to properly record losses for impaired assets. Also, the complaint alleges that the company's internal controls were inadequate to prevent it from improperly reporting its impaired assets.
In addition, the complaint alleges that SunTrust's capital base was not as well capitalized as the company had represented it.
"This type of lawsuit has become a predictable reaction any time a company or an industry experiences a large drop in stock price," said Hugh Suhr, a spokesman for SunTrust, in a written statement. "We believe the lawsuit against SunTrust to be without merit, and intend to defend ourselves vigorously."
The plaintiff seeks to recover damages on behalf of all purchasers of the securities after the registration statement issued in connection with the IPO.