NEW YORK, May 9, 2006 (PRIMEZONE) -- Wolf Haldenstein Adler Freeman & Herz LLP filed the first class action following extensive research and investigation in the United States District Court, Southern District of New York, on behalf of all persons who purchased the debt securities (defined below) of Fairfax Financial Holdings, Ltd. ("Fairfax" or the "Company") (NYSE:FFH) or (TSX:FFH) between March 24, 2004 and March 21, 2006, inclusive (the "Class Period"), against defendants Fairfax and V. Prem Watsa, the Company's Chairman and CEO, alleging violations under the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. Section 78j(b) and 78t(a) and Rule 10b-5, promulgated thereunder, 17 C.F.R. Section 240.10b-5 (the "Class").
The debt securities at issue in this Complaint are:
7.75% notes maturing 04/26/12 ("7.75% Notes");
8.25% notes maturing 10/01/15;
6.875% notes maturing 4/15/08;
8.3% notes maturing 4/15/26; and
7.375% notes maturing 4/15/18
The Complaint also alleges claims on behalf of a sub-class of Class members who also suffered damages upon purchasing the 7.75% Notes pursuant to or traceable to the Company's August 24, 2004 prospectus ("Prospectus") filed by Fairfax with the SEC on August 25, 2004 to effectuate a $95 million aggregate principal amount debt flotation (the "Sub-Class").
The Complaint alleges that statements in the Prospectus omitted material information including, inter alia, (1) failure to detail the Company's increasing liquidity problems; (2) failure to detail second quarter 2004 transactions between Odyssey and Fairfax and to explain that the arrangements were structured to avoid a liquidity squeeze at Fairfax that would have occurred during the quarter; (3) failure to detail Fairfax's exposure stemming from the need to collateralize run-off business; (4) failure to detail the Company's reserves and whether they were adequate to address the Company's growing run-off operations; (5) failure to detail the Company's growing exposure to finite reinsurance agreements within the overall organization; and (6) failure to detail Fairfax's highly leveraged balance sheet and further omissions concerning the Company's equity position. The claims brought with respect to the Prospectus seek to pursue remedies under the Securities Act of 1933 (the "Securities Act") 15 U.S.C. Section 77k and 77l.
Defendants, with respect to the claims brought under the Securities Act are Mr. Watsa, the Company, and Trevor Ambridge, the Company's CFO and Vice President (Principal Financial Officer), M. Jane Williamson, the Company's Vice President (Principal Accounting Officer), Anthony F. Griffiths, a Director of the Company, Robbert Hartog, a Director of the Company, Bradley P. Martin, Vice President and Corporate Secretary to the Company, and Banc of America Securities LLC, the underwriter of the Company's 7.75% Notes.
The Complaint's Exchange Act averments allege that defendants Watsa and the Company violated the federal securities laws by issuing materially false and misleading statements throughout the Class Period that had the effect of artificially inflating the market price of the Company's debt securities.
During the Class Period, the Complaint alleges the Company and Mr. Watsa engaged in conduct designed to omit material information from the public concerning Fairfax's exposure to nontraditional insurance and reinsurance agreements entered into by the Company and its numerous subsidiaries and affiliates, including, but not limited to, Odyssey Re Holdings Corp. ("Odyssey").
The Company's Class Period financial statements also failed to disclose that Fairfax's current reserve accounts and those maintained by its subsidiaries and affiliates were similarly understated. Further, the Company misrepresented its exposure to the risks associated with Odyssey's finite reinsurance contracts and that the Company's run-off operations required material restructuring and additions to reserves.
On March 22, 2006, Fairfax announced that U.S. securities regulators issued subpoenas to third parties (including the Company's independent auditor and a shareholder) in an ongoing probe into certain financial transactions, including nontraditional insurance or reinsurance product transactions. While it was widely known that the SEC was investigating the U.S. reinsurance industry, this was the first time that the depth of the investigation was disclosed. The Company's debt securities declined following this disclosure.
On March 31, 2006, Fairfax filed its delayed annual report on Form 40-F. The annual report stated that the Company would not have to restate prior period's earnings even though Odyssey would restate the period ended September 30, 2005 due to an additional contract that needed adjustment.
As a result of the dissemination of the false and misleading statements set forth above, the market price of Fairfax securities, including its publicly traded debt, was artificially inflated during the Class Period. In ignorance of the false and misleading nature of the statements described above, and the deceptive and manipulative devices and contrivances employed by said defendants, plaintiffs and the other members of the Class relied, to their detriment, on the integrity of the market price of the stock in purchasing Fairfax securities. Had plaintiffs and the other members of the Class known the truth, they would not have purchased said shares, or would not have purchased them at the inflated prices that were paid.
The case name is styled Parks v. Fairfax Financial Holdings, Ltd., et al., 06 cv 2820. A copy of the complaint filed in this action is available from the Court, or can be viewed on the Wolf Haldenstein Adler Freeman & Herz LLP website at www.whafh.com.
If you purchased Fairfax's debt securities during the Class Period or the 7 3/4% Notes pursuant to the Prospectus, you may request that the Court appoint you as lead plaintiff by June 12, 2006.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Wolf Haldenstein, or other counsel of your choice, to serve as your counsel in this action.
Wolf Haldenstein has extensive experience in the prosecution of securities class actions and derivative litigation in state and federal trial and appellate courts across the country. The firm has approximately 60 attorneys in various practice areas; and offices in Chicago, New York City, San Diego, and West Palm Beach. The reputation and expertise of this firm in shareholder and other class litigation has been repeatedly recognized by the courts, which have appointed it to major positions in complex securities multi-district and consolidated litigation.
If you wish to discuss this action or have any questions, please contact Wolf Haldenstein Adler Freeman & Herz LLP at 270 Madison Avenue, New York, New York 10016, by telephone at (800) 575-0735 (Gregory M. Nespole, Esq.), via e-mail at Nespole@whafh.com, classmember@whafh.com or visit our website at www.whafh.com. All e-mail correspondence should make reference to Fairfax.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca.