Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA; TASE:TEVA) has sued Merrill Lynch & Co. for alleged misrepresentations relating to its acquisition of $273 million in auction-rate securities (ARS).
The lawsuit, filed in the US District Court in Manhattan, claims Merrill Lynch was "secretly manipulating" the ARS auction process it underwrote and made "material omissions about the nature and characteristics" of the securities. Teva claimed to have made "staggering losses" as a result. The ARS market collapsed at the start of 2008.
In the lawsuit Teva said, "Teva believed that each of these securities would perform like a short-term investment-grade debt security and would pay a market rate of interest for similar securities. Teva also believed that these securities were highly liquid and could be sold at par, if not immediately, then in the periodic auctions."
Teva did not purchase its ARS directly from Merrill Lynch, which underwrote the securities.
In a separate suit, Seneca Gaming Corp. sued Merrill Lynch over a $5 million tranche of ARS backed by mortgages it purchased in 2006.
In 2008 Teva reached a compromise with Credit Suisse in a similar case when the Swiss bank agrred to buy back the securities.
Merrill Lynch was bought by Bank of America in 2008 and is now a wholly-owned subsidiary of the bank.
A Bank of America spokesperson declined to comment on the Teva lawsuit.
Teva's share fell 0.56% on Friday on Nasdaq to $51.72, giving a market cap of $45.2 billion. The share was down 1.69% at NIS 203.70 in early morning trading today on the TASE.
Published by Globes [online], Israel business news - www.globes-online.com - on August 9, 2009
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