HARTFORD, Conn., May 19, 2008 (PRIME NEWSWIRE) -- The law firm of Schatz Nobel Izard P.C., which has significant experience representing investors in prosecuting claims of securities fraud, announces that a lawsuit seeking class action status has been filed in the United States District Court for the Central District of California on behalf of all persons who purchased the common stock of Downey Financial Corp. ("Downey" or the "Company") (NYSE:DSL) between October 16, 2006 and March 14, 2008, inclusive (the "Class Period").
The Complaint charges that Downey and certain of its officers and directors violated federal securities laws by issuing materially false statements regarding the Company's financial results. Specifically, the Complaint alleges that defendants concealed the following: (i) Downey's portfolio of Option ARMs contained millions of dollars worth of impaired and risky securities, many of which were backed by subprime mortgage loans; (ii) prior to the Class Period, Downey had seen Countrywide's growth and had started to get more aggressive in acquiring loans from brokers such that the loans were extremely risky; (iii) defendants failed to properly account for highly leveraged loans; (iv) Downey had very little real underwriting, which led to large numbers of bad loans; and (v) Downey had not adequately reserved for Option ARM loans, which provided that during the initial term of the loan borrowers could pay only as much as they desired with any underpayment being added to the loan balance.
On October 10, 2007, Downey announced that it expected to incur an operating loss for the 2007 third quarter due to the continued weakening in the housing market. Then, on March 17, 2008, Downey released its monthly selected financial results for the 13 months ended February 29, 2008, which showed a significant increase in non-performing assets to almost 11% of total assets, up from 1.2% in May 2007. Downey had to restructure debt for many borrowers to avoid having their loans fail. On this news, Downey's stock dropped to close at $18.82 per share on March 17, 2008.
If you are a member of the class, you may, no later than July 15, 2008, request that the Court appoint you as lead plaintiff of the class. A lead plaintiff is a class member that acts on behalf of other class members in directing the litigation. Although your ability to share in any recovery is not affected by the decision whether or not to seek appointment as a lead plaintiff, lead plaintiffs make important decisions which could affect the overall recovery for class members.
While Schatz Nobel Izard P.C. has not filed a lawsuit against the defendants, to view a copy of the Complaint initiating the class action or for more information about the case, class action cases in general, and your rights, please contact Schatz Nobel Izard P.C. toll-free at (800) 797-5499, or by e-mail at firm@snilaw.com, or visit our website: www.snilaw.com.