Sun Trust Shareholders Bring Class Action

On Tuesday lawyers representing Sun Trust shareholders filed a class action charging that they did so pursuant based on a false and misleading registration statement and prospectus. The defendants are said to have sold 27.6 million units of the securities at $25 per share, for proceeds of over $690 million.

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 on January 22, 2009, when SunTrust released its earnings for the fourth quarter of 2008, SunTrust reported its first quarterly loss in at least two decades, cut its quarterly dividend from $0.54 to $0.10 per common share, 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 true facts which were omitted from the registration statement were:

• the Company’s assets, including loans and mortgage-related securities were impaired to a greater extent than the Company had disclosed;
• defendants failed to properly record losses for impaired assets;
• the Company’s internal controls were inadequate to prevent the Company from improperly reporting its impaired assets; and
• the Company’s capital base was not as well capitalized as it had represented.

Image Credit: SunTrust.com screenshot