LOS ANGELES (CN) – Three childhood victims of priests’ sexual abuse, all of them severely disabled, say they have been victimized again, by UBS Securities, which put their $11.6 million in settlement money into long-term auction rate securities, without their knowledge or permission. The market for those securities has collapsed, putting their money out of reach.
Plaintiffs claim UBS knew the market was surviving only because UBS itself was manipulating it.
One plaintiff has suffered five heart attacks, is severely diabetic and disabled and has to support his octogenarian mother.
One plaintiff is diabetic, disabled by stroke, needs coronary surgery, and also must pay for his mother’s medical care.
One plaintiff recently lost an arm to cancer and is undergoing cancer therapy.
They claim that “without any plaintiffs’ knowledge or permission, defendants invested the entire sum into risky-non-cash long-term auction rated securities. UBS was an underwriter of these risky securities, and defendants knew but failed to disclose to plaintiffs, material facts about these auction rate securities. In particular, defendants knew, but failed to disclose that these securities were not cash alternatives, but were instead, complex, long-term financial instruments with 30 year maturity dates, or longer. Defendants knew, but failed to disclose that all auction rate securities were only liquid at the time of sale because defendants were artificially supporting and manipulating the auction market to maintain the appearance of liquidity and stability. Defendants knew but failed to disclose that auction rate securities would become illiquid as soon as defendants stopped maintaining this artificial market.”
Plaintiffs claim defendant Richard Frankel, a former UBS fixed income specialist, and Frankel’s “team,” assured them the investments would be safe, and were insured up to $25 million. But on Feb. 13 this year, “87% of all auctions of auction rate securities failed when UBS, and all other major broker dealers, failed and refused to continue to support the auctions,” the complaint states. “The securities became illiquid and are presently essentially worthless. Not only did the securities become worthless, the defendants then froze their account, making it impossible for the plaintiffs to draw out interest.”
Plaintiffs demand restitution of their $11.5 million, and punitive damages. They are represented in Superior Court by Cotchett, Pitre & McCarthy of Burlingame.