| Class Action Filed Against New York Community Bancorp
Lawsuit contends management misled investors October 21, 2004 By PAULA PARISOT |
| One of the fastest growing mortgage companies in the country is now at the center of a shareholder class action lawsuit.
The lawsuit was reportedly filed Tuesday against New York Community Bancorp by the law firm of Milberg, Weiss, Bershad & Schulman, LLP on behalf of investors that held shares of the company from June 27, 2003, and July 1, 2004. The class action, which is pending in the U.S. District Court for the Eastern District of New York, lists CEO Joseph R. Ficalora, Co-chairman Michael Manzulli and CFO Michael Puorro among its defendants, Milberg stated in an announcement. The defendants claimed that a merger of the Westbury, N.Y.-based company and Roslyn Bancorp, Inc.and Roslyn would “significantly enhance shareholder value” and give the company “higher quality assets and far less exposure to extension and interest rate risk,” Milberg reported. The complaint alleges that on April 21, 2004, New York Community reported it had leveraged $400 million from a prior follow-on offering into mortgage-backed securities, increasing its securities holdings by nearly $2 billion to $12.1 billion. The plaintiffs allege that although the defendants stated New York Community “expects to implement a strategic balance sheet restructuring plan, including a $3.5 billion reduction in the securities portfolio,” the board of directors subsequently announced it had engaged three investment banking firms to review “strategic alternatives” for the company, including whether the Company should remain independent. Reaction to this news may have been the reason the stock fell 5.5% from May 7, 2004, to May 10, 2004, the plaintiffs contend. Then, on July 1, 2004, the company announced that as a result of its review of strategic alternatives, it would be forced to restructure by “extend(ing) its liabilities to improve interest rate risk profile,” according to Milberg. The company then sold $5.0 billion in portfolio securities — resulting in a $95 million charge. The share price reportedly fell another 7% in reaction to that news. “The suit is without merit and we intend to defend vigorously,” a company spokeswoman told MortgageDaily.com. New York Community, which reported third quarter net income of $98.8 million, was listed at number 56 on Fortunes most recent list of the 100 Fastest Growing companies — 49 spots lower than last year — with Fortune attributing the decline to “a string of bad investments in mortgage securities has hit the stock.” New York Community was previously identified as one of three banks interested in acquiring New York-based Staten Island Bancorp Inc. according to an October 2003 article in The New York Daily News. But the acquisition talks reportedly dissipated after Staten Island released its own disappointing earnings report. |
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Paula Parisot is a freelance writer for MortgageDaily.com. In addition to 4 years’ journalism experience at other news publications, Paula has worked in the mortgage industry. Email Paula at: realitycheck@klondyke.net |
