In this action, plaintiff asserts claims on behalf of a class which has been certified by the Court and, as certified, consists of all persons or entities who exchanged shares of Summit Bancorp (“Summit”) common stock for shares of FleetBoston Financial Corporation (“FBF” or the “Company”) common stock in connection with the merger between FBF and Summit (the”Merger”), and pursuant to the registration statement and prospectus filed by FBF on or about January 25, 2001 (the “Merger Registration Statement” or “Registration Statement”) for the shares it would be issuing in connection with the Merger (the “Class”), and who sold such FBF stock between December 21, 2001 and November 7, 2003. The action commenced in September 2002, seeks to pursue remedies for violations of the Securities Act of 1933 (the “Securities Act”).
FBF operated a substantial banking business in Argentina. In connection therewith, FBF failed to reveal that it was under-reserved with respect to its Argentina portfolio and had engaged in issuance of loans which would give rise to substantial losses if the convertibility between the U.S. Dollar and Argentine Peso was broken. In fact, that break in convertibility occurred, the under-reserve became revealed to the general public and substantial losses occurred after the Summit Bank merger and stock swap. In addition, FBF engaged in various off-the-books loan transfers and financial transactions which were allegedly designed to improperly manage (e.g., reduce) the losses which FBF was required to report.
After the fact s concerning FBF’s Argentine losses, increased nonperforming loans and under-reserve were revealed, FBF announced that it would take a charge of $675 million related to the deteriorating Argentine economy, in addition to $251 million in “translation losses” due to the falling Peso, bringing total charges relating to the Argentine situation for the second quarter to $925 million. As a result of these actions, as of April 2003, FBF had taken cumulative charges of approximately $2.3 billion since the beginning of the Argentine crisis. In addition, during the second quarter of 2002, the Company placed all sovereign-related assets and a significant portion of private sector loans on nonaccrual status. At June 30, 2002, total nonperforming assets in Argentina amounted to $2.0 billion, which represented over 50% of all of FBF’s non-performing assets. At June 30, 2002, FBF’s reserve for credit/losses amounted to $3,867 million, of which approximately one-third related to Argentina. (Amended Complaint, & 138).
After the disclosure of the problems at FBF, the price of FBF common stock declined to trade in a range of $23-24 per share. After the commencement of this action, the Court appointed as Co-Lead Counsel the firms of Stull, Stull & Brody, Weiss & Lurie and Lerach Coughlin Stoia Geller Rudman & Robbins, LLP and the firm of Kantrowitz Goldhamer & Graifman, P.C. as Liaison Counsel. Thereafter, the defendants moved to dismiss the complaint on two occasions both of which were denied. On December 22, 2005, the Court certified the litigation class. The matter is currently proceeding through litigation.