NEW YORK, June 3, 2005 (PRIMEZONE) -- Murray, Frank & Sailer LLP has filed a class action lawsuit in the United States District Court for the Southern District of New York on behalf of all securities purchasers of Doral Financial Corporation ("Doral" or "the company") (NYSE:DRL) between May 15, 2000 and May 26, 2005, inclusive (the "Class Period").
The Complaint charges Doral and certain of the Company's executive officers with violations of federal securities laws by issuing materially false and misleading financial statements to the investing public. Doral is a financial services company engaged in mortgage banking, banking, institutional securities operations, and insurance agency activities in the New York City metropolitan area and in Puerto Rico. A substantial portion of its business is the offering of various mortgage loan products secured by single family residences.
The Complaint alleges that during the Class Period defendants failed to disclose and/or misrepresented material adverse facts, including that: (a) the Company was using overly aggressive and unrealistic assumptions to value its derivative portfolio of interest-only strips ("IO Strips") used to hedge its mortgage portfolio against interest rate fluctuations; (b) the Company was using fraudulent accounting practices and materially overstated its net income, net gain on mortgage loan sales and net capital; and (c) the Company was using ineffective risk management and hedging strategies against the increasing risk of rising interest rates.
On January 19, 2005, the Company warned of potential trouble with its hedging strategy against interest rate changes through its use of a derivative portfolio of IO Strips. Subsequently, on March 15, 2005, Doral filed its Annual Report with the SEC in which the Company disclosed for the first time its use of overly aggressive assumptions in valuing its IO Strips portfolio. The revelation was followed by downgrades of the Company's common stock by numerous securities analysts and Standard & Poor's lowered its outlook for Doral's long-term debt from stable to negative, expressing "concern over the sustainability of the Company's business model." In a matter of days Doral stock plummeted from $38.29 per share to $21.50 per share in extremely heavy volume.
On April 19, 2005, the Company announced that it had determined that "it is appropriate to correct the methodology used to calculate the fair value of its portfolio of floating rate interest only strips ("IOs") and estimated that the correction would result in a decrease in the fair value of its floating rate IOs of between $400 million to $600 million as of December 31, 2004. On May 27, 2005, the Company confirmed in a press release that it would reduce the recorded fair value of its floating rate interest only strips by approximately $600 million.
Murray, Frank & Sailer LLP and its predecessor firms have devoted its practice to shareholder class actions and complex commercial litigation for more than thirty years and have recovered hundreds of millions of dollars for shareholders in class actions throughout the United States.
If you purchased or otherwise acquired Doral securities on any world exchange between May 15, 2000 and May 26, 2005, and sustained damages, you may, no later than June 20, 2005, move the Court to serve as lead plaintiff. Shareholders outside the United States may also join the action, regardless of which exchange was used to purchase the securities. To serve as lead plaintiff, however, you must meet certain legal requirements. You can join this class action as lead plaintiff online at http://www.murrayfrank.com/CM/NewCases/NewCases.asp. If you would like to discuss this action, this announcement, or your rights and interests, please contact plaintiff's counsel Eric J. Belfi or Christopher S. Hinton of Murray, Frank & Sailer LLP.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca