PHILADELPHIA, May 13, 2005 (PRIMEZONE) -- Law Offices Bernard M. Gross (www.bernardmgross.com) announces that class action lawsuits were commenced against:
Doral Financial Corp. -- in the United States District Court for the Southern District of New York on behalf of all persons who purchased Doral securities (stocks and/or notes)(NYSE:DRL) between May 15, 2000 and April 19, 2005. R&G Financial Corp. -- in the United States District Court for the Southern District of New York on behalf of all persons who purchased R&G securities (stocks and/or notes) (NYSE:RGF) between April 21, 2003 and April 25, 2005.
The Doral complaint alleges that during the Class Period, defendants, Doral Financial Corp., Salomon Levis, Richard Melendez and Richard F. Bonini made materially false and misleading statements regarding the Company's business and prospects. Defendants failed to disclose to the investing public that the Company was improperly overvaluing its floating rate interest only ("IO") Strips, an important part of its mortgage portfolio, and thereby substantially inflating its financial results during the Class Period. As a result, during the Class Period the Company's net income and net gain on mortgage loan sales were materially overstated, the Company's return on equity and capital were materially overstated, and the Company's reported net capital was materially overstated. Defendants also failed to disclose to investors that the Company's risk management, hedging strategies and internal controls were deficient and would not protect the value of Doral's portfolio in a rising rate environment, despite repeated reassurances to the contrary. On April 19, 2005, Doral announced that it was restating its financial results for 2000 through 2004. According to Doral, the restatements are necessary to correct the accounting treatment for valuing Doral's IO Strip portfolio. Doral admitted that eventually it will be required to take a charge of between $290 million and $435 million. As a result of these false statements, Doral's stock price traded at inflated levels during the Class Period, increasing to as high as $49.45 per share on January 18, 2005. The Company sold $740 million worth of notes and $345 million worth of preferred stock during the Class Period. However, after the truth was revealed in Doral's press release on April 19, 2005, the Company's shares fell to below $16 per share.
The R&G complaint alleges that from April 21, 2003 through April 25, 2005 ("Class Period"), defendants, R&G Financial Corp., Victor J. Galan, Joseph R. Sandoval and John A. Koegel failed to disclose that its earnings were materially undermined by aggressive assumptions relating to "gain on sale" income and the value of "interest only" or "IO" Strips it retained upon the completion of securitization transactions and that those and other material accounting and valuation issues caused it to prepare and to disseminate materially false financial statements in violation of generally accepted accounting principles (GAAP). The complaint alleges the R&G knowingly or recklessly misrepresented its true financial condition and inflated the price of its securities artificially during Class Period. Ultimately, on April 25, 2005, R&G announced that it would restate its audited financial statements for the years ended December 31, 2003 and December 31, 2004 and interim periods therein. After the truth began to be revealed in R&G's press release on April 25, 2005, the Company's shares fell to below $15 per share, previously trading as high as $40 per share. On April 26, 2005, R&G announced that the SEC had commenced an investigation into the restatement.
If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff's counsel, Deborah R. Gross or Susan R. Gross of Law Offices Bernard M. Gross at 866-561-3600(toll-free) or via e-mail at susang@bernardmgross.com. If you are a member of this class, you can view a copy of the complaint as filed at http://www.bernardmgross.com. 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. Lead Plaintiff motions in Doral must be filed by June 20, 2005 and in R&G Financial by June 27, 2005. Law Offices Bernard M. Gross, P.C. has significant experience and expertise in prosecuting class actions.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca.