CA Court Says Anschutz Suit Against Deutsche Bank Can Proceed
A District Court in California has said that an auction rate securities (ARS) case filed by Anschutz Corporation against Deutsche Bank Securities, Inc. and several credit rating agencies can proceed, according to Bloomberg. The case revolves around Deutsche Bank auction rate securities (ARS) that were purchased by Anschutz through Credit Suisse between July 2006 and August 2007.
Deutsche Bank served as a market maker for the ARS and assured Anschutz that the auctions would be successful as long as it kept supporting bids, according to Anschutz’s allegations. They also alleged that Deutsche Bank “manipulated the market” by putting in support bids for every auction that the securities were involved in as well as for other ARS, where it was the lead or sole broker-dealer. When the auctions failed in August 2007, after Deutsche bank stopped making bids, Anschutz contends that not only did Deutsche know this would happen but they made it appear there was substantial third party demand for the securities.
It is also alleged that the credit rating agencies relaxed their rating system to get Deutsche Bank’s business, while knowing all along that the AAA rating would be misleading and false to investors. Anschutz has further contended that the rating agencies either knew or should have known that Deutsche Bank was creating an artificial market for the auction rate securities (ARS).