Ambac Financial Group, Inc. Derivative Litigation
Ticker Symbol:
NYSE: ABK
Practice:
Securities Fraud & Shareholder Litigation
Phase:
Current On February 1, 2008, Chimicles & Tikellis LLP filed the first of two shareholder lawsuits, derivatively on behalf of Ambac Financial Group, Inc. (“Ambac” or the “Company”), in the Court of Chancery of the State of Delaware, for wrongdoing stemming from Ambac’s financial and business exposure to writing insurance on collateralized debt obligations (“CDOs”) whose underlying assets were comprised of residential mortgage backed securities (“RMBS”). These lawsuits allege wrongdoing by several of Ambac’s current and former officers and directors, for, among other things, breaches of fiduciary duties, waste of corporate assets and unjust enrichment. These lawsuits allege that the wrongdoing occurred from at least as early as October 19, 2005 through present.
The lawsuits allege that Ambac’s core business prior to 2005 was insuring conservative municipal bonds through its principal operative subsidiary, Ambac Assurance Corporation. The lawsuits allege that Ambac, in recent years, lured by the higher profits and larger growth rate, began writing insurance on CDOs whose underlying assets were comprised of RMBS, some of which were classified as subprime. The lawsuits further assert that instead of heeding the multitude of red flags concerning the financial viability and stability of the subprime market, which in turn exposed Ambac’s business to tremendous financial exposure, write-downs, losses and loss of it AAA rating, Defendants recklessly continued to cause Ambac to insure billions worth of subprime assets and to make a multitude of unsupported and reckless statements concerning Ambac’s “record growth” and financial condition.
The lawsuits claim Defendants are liable to the Company for: (a) abandoning and abdicating their responsibilities with regard to prudently managing the assets and business of Ambac in a manner consistent with the operations of a publicly held corporation; (b) failing to comply with the nondelegable mandate of the Company’s Audit & Risk Assessment Committee Charter; (c) failing to properly oversee or implement policies, procedures and rules to ensure compliance with federal and state laws requiring the dissemination of accurate financial statements; (d) causing and permitting the Company to misrepresent the Company’s business prospects and financial results; (e) failing to identify the risks of shifting from public finance to structured finance, including extreme increase in liabilities taken on by Ambac as a result of such shift; (f) causing Ambac to lose its most valuable “asset” – its AAA rating; (g) causing Ambac to significantly overextend itself by wrapping too much for too little; (h) failing to discharge properly their fiduciary duties as financial experts; (i) exposing the Company to liability for violations of Federal law; (j) exposing the Company to massive civil liability and shareholder securities litigation; (k) exposing the Company to costly litigation and to damages owing to counterparties in credit default swaps; (l) causing the Company to be a target of regulatory investigations by the Massachusetts Secretary of State and the subject of lawsuits filed by the cities of Los Angeles, Stockton and New Orleans; and (m) causing the Company to issue bonuses worth millions of dollars despite the Company’s inability to raise capital and dramatic decrease in market capitalization. In sum, Defendants’ actions were not a good faith exercise of prudent business judgment to protect and promote the Company’s interests.
On March 5, 2008, the cases were consolidated with the caption: In re: Ambac Financial Group, Inc. Shareholders Derivative Litigation, Consolidated C.A. No. 3521-VCL.
On December 30, 2008 the Court of Chancery stayed the consolidated action in favor of those pending in New York. On January 20, 2009, Plaintiffs from the Delaware action (the “Proposed Intervenors”) filed a Motion to Intervene along with a Complaint in Intervention in In re Ambac Financial Group, Inc. Deriv. Litig., Case No. 08-civ-854 (SHS) (the “Federal Action”), currently pending in the Southern District of New York. On May 12, 2009 the Southern District of New York issued an Opinion and Order denying the Motion to Intervene, holding that the interests of the Proposed Intervenors were adequately represented. Defendants’ Motion to Dismiss the Verified Amended Derivative Complaint in the Federal Action, filed June 2, 2009, was fully briefed as of July 17, 2009 and is currently under advisement by Judge Sidney H. Stein. The Company is now in bankruptcy. The New York and Delaware litigation are stayed pending bankruptcy.
| Attachment | Size |
|---|---|
| Ambac - Amended Complaint | 1.44 MB |
Attorneys to Contact:
Pamela S. Tikellis (PamelaTikellis@chimicles.com)
P.O. Box 1035, 222 Delaware Ave, Suite 1100, Wilmington, DE 19801 Phone: 302-656-2500