Disk drive maker Western Digital Corp. and military body armor supplier Ceradyne Inc. are suing bankrupt investment bank Lehman Brothers Holdings Inc. for nearly $200 million over investment deals they say went bad.
Lake Forest-based Western Digital and Costa Mesa’s Ceradyne filed lawsuits in Lehman’s bankruptcy proceedings earlier this week, according to the Wall Street Journal.
The two companies allege Lehman misled them into investing in auction-rate securities, only to end up with millions of dollars in assets that they can’t sell.
Auction-rate securities are corporate or government debt with an interest rate that resets daily, weekly or monthly through an auction.
The market for auction-rate debt froze up last year, with many investment banks agreeing to buy back the debt from investors.
Western Digital and Ceradyne accuse Lehman of pushing the investments even as the market for the securities was drying up.
Representatives for Lehman, Western Digital and Ceradyne declined to comment for the Wall Street Journal’s story.
Western Digital said in its lawsuit that it’s stuck with $26 million of asset-backed securities. Ceradyne said it has more $35 million.
Both are suing for the total amount they invested plus damages.
*For more on this story,
read the full Wall Street Journal article.
