COLCHESTER, Conn., April 21, 2005 (PRIMEZONE) -- Scott + Scott, LLC announced that it filed a shareholder class action lawsuit by request on behalf of purchasers of Doral Financial Corp. (NYSE:DRL) securities between March 15, 2004 and April 15, 2005 (a new complaint is being filed today extending the class period to include those who purchased from October 2, 2002 through April 18, 2005). You can reach attorney Neil Rothstein at nrothstein@scott-scott.com, 800/332-2259 or 619/233-4565 (or by cell if necessary at 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. Other defendants included Salomon Levis, Zoila Levis, David Levis and Ricardo Melendez. Other defendants may be named as the investigation continues.
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. The Complaint alleges that 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 allegedly 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.
Also alleged is that Defendant 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 April of 2005, the Company finally disclosed the magnitude of the problems at Doral and announced a possible $435 million reduction in earnings. Doral's stock price crashed, going from a $49.25 to $16.15 in less than three months.
If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from today. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff's counsel, Scott + Scott, LLC. If you are a member of this class, you can view a copy of the complaint as filed by contacting the firm. Any member of the purported class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.
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.
Scott + Scott, LLC is based at 108 Norwich Avenue, Colchester, CT 06415; phone: 860/537-3818; fax: 860/537-4432. This release is issued in accordance with the applicable U.S. federal law.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca