February 20, 2019

Credit Suisse Group AG was partially denied its bid to escape a putative class action on Tuesday when a New York federal judge found that investors adequately alleged the bank hid problems with risk management in its fixed-income franchise ahead of $1 billion in write-downs in 2016.

The investors, led by four pension funds, had accused the bank and several executives of misleading them in its financial reporting about procedures to monitor and control risk, the extent of Credit Suisse's positions in collateralized loan obligations and distressed debt, and the riskiness of those investments, according to the filing. Collateralized loan obligations, or CLOs, are securitizations backed by major loans used by big companies with heavy debt loads.

Credit Suisse's alleged misstatements allowed the bank to amass $4.3 billion in exposure to CLOs and distressed debt instruments, resulting in the massive write-downs and a loss to investors, all while giving them the impression that these positions were "entirely benign," the shareholders said.

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The investors' co-lead counsel Carol Gilden of Cohen Milstein Sellers & Toll PLLC and Steven Singer of Saxena White PA said they "look forward to continuing to proceed with our case on behalf of investors." 

The pension funds are represented by Carol V. Gilden, Daniel S. Sommers, Adam H. Farra and Eric S. Berelovich of Cohen Milstein Sellers & Toll PLLC, and Steven B. Singer, Kyla Grant, Maya Saxena, Joseph E. White III, Lester R. Hooker, Kenneth M. Rehns and Dianne M. Anderson of Saxena White PA.

The complete article can be accessed here.