COLCHESTER, Conn., April 20, 2005 (PRIMEZONE) -- Scott + Scott, LLC announced that it is filing a shareholder class action lawsuit on behalf of purchasers of Doral Financial Corp. (NYSE:DRL) securities between March 15, 2004 and April 15, 2005 (this is the present class period; any purchaser of Doral securities in the past five years may contact the firm). You can reach attorney Neil Rothstein at nrothstein@scott-scott.com, 800/332-2259 or 619/251-0887. Scott + Scott has offices in Connecticut, Ohio and California. The firm (http://www.scott-scott.com) specializes in complex litigation including securities fraud and represents foundations, individuals, corporations and pension funds worldwide. Shareholders or other interested individuals may contact the firm.
It is alleged, among other things, that during the restatement period Doral improperly valued its I/Os by using flawed loss assumption, artificially high prepayment assumptions and artificially low discount rates. As a result of such conduct, Doral's stock price traded at artificially inflated levels. It is further alleged that during the restatement period Doral falsely reported its results through its failure to accurately account for its I/O assets, thereby overstating its net income and revenue and understating the Company's net liabilities in violation U.S. GAAP. This enabled certain insiders to reap more than $10,000,000 dollars in insider trading profits, as well as cash incentive bonuses.
It is further alleged that in the 4Q:04, the impact of the flattening yield curve caught up to the defendants. In their quarterly filing, Doral recorded a $97.5 million pretax impairment charge on the I/O strips as the result of an increase in interest rates, specifically a rise in LIBOR -- the London interbank offered rate. Rather than come clean and disclose that they had been misleading investors, it is alleged that Doral attempted to further this false story. In its quarterly filing for 4Q:04, the Company noted its bottom line had been increased, with a $77 million tax benefit stemming from a temporary 50% reduction in Puerto Rico's long-term capital gains rate. This tax benefit applied to transactions between July 1, 2004, and June 30, 2005. Doral claimed that the tax reduction offset a $95 million trading loss it incurred on some of its I/O strips that were used to hedge against interest rate fluctuations. The Company stated that the new law prompted it to "accelerate" the time frame for recording an impairment charge on the value of its I/O strips.
Salomon Levis (Doral's CEO), in an email response to a journalist's question about the bank's earnings, tried to further mislead the public about the true nature of Doral's finances. It is alleged that these statements were false and misleading when made since Solomon Levis knew that the temporary tax benefit simply "masked'' the Company's derivative shortfall and indicated that Doral's hedging strategy against interest rate changes was inadequate to safeguard the value of its I/O portfolio from interest rate swings. In Aprilof 2005, the Company finally disclosed the magnitude of the problems at Doral. The stock price crashed, going from a $49.25 to $16.15 in less than three months.
Scott + Scott, a Connecticut-based law firm with offices in Chagrin Falls, Ohio and San Diego, California, is a law firm with a national practice and reputation. The firm is currently litigating major securities, antitrust and employee retirement plan cases throughout the United States and represents pension funds, charities, foundations, individuals and other entities worldwide -- in both class and non-class cases. Scott + Scott dedicates itself to client communication and satisfaction. . Please visit our website at http://www.scott-scott.com to learn more about the firm, its practice and other cases. If you wish to discuss this action with an attorney or have any questions concerning this notice, your rights or any matter within our expertise, please contact attorney Neil Rothstein at nrothstein@scott-scott.com or by calling 800/404-7770 (EST) or 800-332-2259 (PST). You can dial direct in California at 619-233-4565.
This release is issued in accordance with the applicable U.S. federal law.