[ by Melanie Gretchen ]

Deutsche Bank AG was defeated by a court decision that supported the right of the bank's shareholders to file a class action suit against the bank.  The shareholder complaint alleges that Germany's largest bank misrepresented the risk of packaging home loans into complex financial products.  They claim the bank investors operated a scheme to maximize profits at their expense. 

U.S. District Judge Katherine Forrest in Manhattan ruled that the lawsuit, which seeks class-action status,can go forth - and noted in her opinion:   "Plaintiffs have certainly set forth sufficient plausible allegations to support a claim for a fraudulent scheme against Deutsche Bank."

Federal Findings and Allegations. The lawsuit, filed in 2011, accused the bank of issuing false and misleading statements about its business and financial results.  To this end, Deutsche Bank had put together and sold mortgage-backed securities that the bank knew were not good quality, misrepresented its risk management practices and hid its failure to write down impaired securities.  When the bank reported billions of dollars in losses beginning in 2008, its stock plummeted from $159.59 in May 2007 to $21.27 in January 2009.

The case: IBEW Local 90 Pension Fund v. Deutsche Bank AG, et al, U.S. District Court, Southern District of New York, No. 11-04209.

For further details, go to [Reuters, 3/27/13].

To contact Melanie Gretchen: melanie@compliance-insights.com.