2003-04-28 sec-litreleases pdf 14 KB 3,225 chars

SEC v. : 03 Civ. 2940 (WHP)

Exhibit of Federal Court Approves Settlement of SEC Enforcement Actions Involving Conflicts of Interest Between Research and Investment Banking
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summary

Lehman Brothers Inc. agreed to a $100 million settlement with the SEC for securities fraud involving misleading buy ratings on five tech stocks—Broadwing, DDi Corp., Razorfish, Real Networks, and RSL Communications—during 1999–2001, with $25 million allocated to a court-supervised Distribution Fund for eligible investors, without admitting guilt.

paragraph

The SEC accused Lehman Brothers Inc. of securities fraud through improper analyst recommendations that misled investors by issuing inflated buy ratings on five technology stocks while privately expressing negative views. As part of a $100 million settlement, $25 million was designated for a Distribution Fund to compensate investors who purchased Broadwing (Jan. 25–Apr. 25, 2001), DDi Corp. (Jun. 30–Sep. 28, 2000), Razorfish (May 24–Aug. 22, 1999), Real Networks (Jul. 11–Oct. 17, 2000), or RSL Communications (Mar. 2–Sep. 6, 2000) during the specified periods. Lehman Brothers did not admit liability, and the court explicitly stated that the identified securities and timeframes were for administrative distribution purposes only, with no precedential effect.

narrative

The SEC brought civil charges against Lehman Brothers Inc. for securities fraud stemming from deceptive research practices, in which analysts issued misleading buy ratings on five technology stocks—Broadwing, DDi Corp., Razorfish, Real Networks, and RSL Communications—while privately expressing negative opinions, thereby inflating stock prices and misleading investors. In October 2003, Lehman Brothers agreed to a $100 million settlement with the SEC, of which $25 million was allocated to a Distribution Fund to compensate eligible investors who purchased these securities during defined timeframes between May 1999 and April 2001. The court issued an order specifying the exact equity securities and purchase periods for administrative purposes, including Broadwing (Jan. 25–Apr. 25, 2001), DDi Corp. (Jun. 30–Sep. 28, 2000), Razorfish (May 24–Aug. 22, 1999), Real Networks (Jul. 11–Oct. 17, 2000), and RSL Communications (Mar. 2–Sep. 6, 2000). The Distribution Fund Administrator was tasked with developing an equitable plan to distribute the funds to eligible recipients, based solely on purchase records during those windows. Importantly, the court emphasized that the identification of securities and periods was not a judicial finding of fraud, nor did it constitute an admission of guilt by Lehman Brothers. The settlement was part of a broader industry-wide enforcement initiative targeting conflicts of interest in investment research. The order explicitly stated that it had no precedential effect in other legal proceedings and was intended solely to facilitate efficient fund distribution.

Enriched metadata

Scheme
financial-fraud (90%)
Court
Southern District of New York
Classified financial-fraud(confidence 90%). EDGAR detection: forms 10-K/10-Q/8-K/NT 10-K· recall 67% / precision 23%. detection rule →
Parties
Securities and Exchange CommissionLehman Brothers Inc.
Keywords
distribution funddistributionequity securitiessecurities questionquestion relevantfundfund planfinalsecuritiesequityrelevant periodperiod purchaseincquestionrelevant

Extracted insights

Entities 1
  • company a final judgment as to defendant lehman brothers inc.
Triples 6
  • The Court Signed A Final Judgment as to Defendant Lehman Brothers Inc.
  • Section II of the Final Judgment Calls for The creation of a Distribution Fund, which consists of Defendant’s Federal Payment plus any income and interest earned thereon.
  • Section V.A of the Final Judgment Requires The Distribution Fund Administrator to formulate and administer a Distribution Fund Plan ... intended to provide for the equitable, cost-effective distribution of funds to Eligible Distribution Fund Recipients.
  • Section V.C.1 of the Final Judgment Defines Eligible Distribution Fund Recipient as a person who must have purchased equity securities in question through Defendant during the relevant period of purchase.
  • Section V.C.1 of the Final Judgment States Identification of the equity securities in question and the relevant period of purchase for each such equity security will be set forth in a further order of the Court.
  • The Court Ordered The equity securities in question and the relevant periods of purchase for each such equity security as follows: Broadwing, Inc. Jan. 25, 2001 – April 25, 2001; DDi Corp. June 30, 2000 – Sept. 28, 2000; Razorfish, Inc. May 24, 1999 – Aug. 22, 1999; Real Networks, Inc. July 11, 2000 – Oct. 17, 2000; RSL Communications March 2, 2000 – Sept. 6, 2000.
PDF
SEC v. : 03 Civ. 2940 (WHP) · Source
Text layers
Extracted body text (3,225c) 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
________________________________________________ 
        : 
SECURITIES AND EXCHANGE COMMISSION, : 
        : 
                                                Plaintiff,                                    :            Civil            Action            No.            
        : 
                        -against-                                                            :            03            Civ.            2940            (WHP)            
        : 
LEHMAN            BROTHERS            INC.,                                                :            
        : 
    Defendant.   : 
________________________________________________: 
 
ORDER REGARDING DISTRIBUTION FUND PLAN 
 
 On October 31, 2003, the Court signed a Final Judgment as to Defendant Lehman 
Brothers Inc. (“Final Judgment”).  Section II of the Final Judgment calls for the creation of a 
Distribution Fund, which consists of Defendant’s Federal Payment plus any income and interest 
earned thereon.
1
  Under Section V.A of the Final Judgment, “[t]he Distribution Fund 
Administrator shall formulate and administer a Distribution Fund Plan ... intended to provide for 
the equitable, cost-effective distribution of funds to Eligible Distribution Fund Recipients.”  
Under Section V.C.1 of the Final Judgment, to be an Eligible Distribution Fund Recipient, a 
person must have purchased “equity securities in question” through Defendant during the 
“relevant period of purchase.”  Also under Section V.C.1, “[i]dentification of the ‘equity 
securities in question’ and the ‘relevant period of purchase’ for each such equity security will be 
set forth (solely for the purpose of administering the Distribution Fund Plan) in a further order of 
the Court.” 
                                                
 
1
 All defined terms in the Final Judgment apply to this Order. 

 Accordingly, IT IS HEREBY ORDERED that the “equity securities in question” and the 
“relevant period of purchase” for each such equity security, as those terms are used in Section 
V.C.1 of the Final Judgment, are as follows: 
 
Equity Securities in Question   Relevant Periods of Purchase
 Broadwing, Inc.    Jan. 25, 2001 – April 25, 2001 
 DDi Corp.     June 30, 2000 – Sept. 28, 2000 
 Razorfish, Inc.     May 24, 1999 – Aug. 22, 1999 
 Real Networks, Inc.    July 11, 2000 – Oct. 17, 2000 
 RSL Communications    March 2, 2000 – Sept. 6, 2000 
 
The identification of “equity securities in question” and “relevant periods of purchase” made 
herein is solely for the purpose of facilitating the efficient administration of the Distribution 
Fund Plan, is not a judicial or Commission finding, and is not intended to have precedential 
effect in other actions. 
            SO            ORDERED.            
 
Dated: New York, New York 
            October            31,            2003            
 
 
                                                                        ________________________________            
                                                                        WILLIAM            H.            PAULEY            III            
      UNITED STATES DISTRICT JUDGE
 
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OCR text (2,645c · tika · 95% conf) 
UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
________________________________________________ 
        : 
SECURITIES AND EXCHANGE COMMISSION, : 
        : 
    Plaintiff,   : Civil Action No. 
        : 
  -against-     : 03 Civ. 2940 (WHP) 
        : 
LEHMAN BROTHERS INC.,    : 
        : 
    Defendant.   : 
________________________________________________: 
 

ORDER REGARDING DISTRIBUTION FUND PLAN 
 

 On October 31, 2003, the Court signed a Final Judgment as to Defendant Lehman 

Brothers Inc. (“Final Judgment”).  Section II of the Final Judgment calls for the creation of a 

Distribution Fund, which consists of Defendant’s Federal Payment plus any income and interest 

earned thereon.1  Under Section V.A of the Final Judgment, “[t]he Distribution Fund 

Administrator shall formulate and administer a Distribution Fund Plan … intended to provide for 

the equitable, cost-effective distribution of funds to Eligible Distribution Fund Recipients.”  

Under Section V.C.1 of the Final Judgment, to be an Eligible Distribution Fund Recipient, a 

person must have purchased “equity securities in question” through Defendant during the 

“relevant period of purchase.”  Also under Section V.C.1, “[i]dentification of the ‘equity 

securities in question’ and the ‘relevant period of purchase’ for each such equity security will be 

set forth (solely for the purpose of administering the Distribution Fund Plan) in a further order of 

the Court.” 

                                                 
1 All defined terms in the Final Judgment apply to this Order. 



 Accordingly, IT IS HEREBY ORDERED that the “equity securities in question” and the 

“relevant period of purchase” for each such equity security, as those terms are used in Section 

V.C.1 of the Final Judgment, are as follows: 

 Equity Securities in Question   Relevant Periods of Purchase
 Broadwing, Inc.    Jan. 25, 2001 – April 25, 2001 
 DDi Corp.     June 30, 2000 – Sept. 28, 2000 
 Razorfish, Inc.     May 24, 1999 – Aug. 22, 1999 
 Real Networks, Inc.    July 11, 2000 – Oct. 17, 2000 
 RSL Communications    March 2, 2000 – Sept. 6, 2000 
 
The identification of “equity securities in question” and “relevant periods of purchase” made 

herein is solely for the purpose of facilitating the efficient administration of the Distribution 

Fund Plan, is not a judicial or Commission finding, and is not intended to have precedential 

effect in other actions. 

 SO ORDERED. 

 
Dated: New York, New York 
 October 31, 2003 
 
 
      ________________________________ 
      WILLIAM H. PAULEY III 
      UNITED STATES DISTRICT JUDGE 

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