OTTAWA (AFP) — Investors launched a multibillion dollar class action lawsuit Wednesday against the Canadian Imperial Bank of Commerce, alleging it downplayed its exposure to the US subprime mortgage meltdown.
Investors who purchased CIBC shares between May 31, 2007 and February 28, 2008 launched the suit against the bank and several of its directors, alleging they "misrepresented the magnitude and level of risk associated with its US subprime residential mortgage investments."
CIBC is purported to have said its total exposure to the failing US subprime residential mortgages market was "not a major issue" when, in fact, the bank had exposure to billions of dollars of losses.
Further, CIBC failed to disclose that one of its principal hedge counterparties ACA Financial was "woefully undercapitalized" and was far from able to provide any meaningful hedge protection to the bank's subprime mortgage investments, said the claimants.
These misrepresentations inflated the price of CIBC common shares, the claimants said.
And when CIBC later disclosed write downs of 3.379 billion dollars related to its subprime mortgage investments in late 2007 and early 2008, its share price fell dramatically.
"Investors appear to have lost billions due to the bank's misrepresentations and its failure to manage investments prudently," lawyer Joel Rochon said in a statement.
The allegations raised in the claim have not yet been proven in court.
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