WHO SAYS THE WALL STREET INVESTMENT BANKS ARE ALWAYS MAKING SKY-HIGH PROFITS CONCEITEDLY ? THEY ARE INVOLVED IN LAWSUITS OCCASIONALLY AS WELL !

LUMINENT SUES MERRILL OVER MORTGAGE LOSSES

(The article is taken from South China Morning Post dated 29th December 2007 with minor adjustments, for reference only)

Luminent Mortgage Capital, the home-loan investment company that lost about 90 per cent of its market value in 2007, sued Merill Lynch, saying the firm misrepresented the risk of mortgage-backed securities it sold.

Luminent invested in the securities in 2005 believing the mortgages were made to creditworthy borrowers and backed by “prime quality” collateral, the investment firm said at the end of 2007.

The default rate had been “extraordinarily high”, Luminent said.

Merrill denied the allegations, spokesman Bill Halldin said.

Sean O'Shea, a partner at the O'Shea Partners law firm said: “Merrill sold us subprime but packaged it as A-rated.

We do not think there is any way that they could not have known what they were selling us was defective.

Meanwhile, CNBC reported that Merrill Lynch planned to announce about 1,600 layoffs, less than 3 percent of its workforce, after disclosing forth-quarter write-downs.

The layoffs were likely to be in trading positions and related areas and were not likely to include the investment banking or private client groups, CNBC's Charlie Gasparino said.

Luminent said a lender was seeking US$8 million from Luminent, mostly in connection with transaction involving Merrill, the third-largest United States securities firm.

Luminent did not believe it was in default, the company said.

Luminent, however, did not name the lender.

Merrill “properly and accurately disclosed the overall quality of the loan pool”, Mr. Halldin said. “Luminent is a sophisticated institutional investor and we satisfied all their information requests before and at the time of their purchase.”

(Comments: Who can you believe in this money-driven world ? Even smart and tough American lawyers via investment institutions are said to be misrepresented when they are having non-legal/investment transactions with the world leading investment banks. Both of them are talking about different stories when the investment transactions fail. It seems from the story that the conference recording of decision-making things are of great necessities, for it can recall and tell the true stories of earlier stages; in additions, in the Untied States, recording may at least serve as persuasive evidence to convince judges to much extents, while in Mainland China, original recording via legal channels may constitute favorable legal evidence)