Securities Fraud: Class Action Proposed Against Fifth Third Bankcorp

Cincinnati, OHYet another company and its CEO have been called to the carpet for alleged securities fraud and other violations under the Securities Exchange Act of 1934.

Fifth Third Bankcorp and its President and Chief Executive Officer Kevin T. Kabat, is accused of issuing materially false and misleading statements with regard to the quality of Fifth Third Bankcorp's Tier 1 capital, among other allegations. It is alleged that as a result of the issuance of false and misleading statements, the price of Fifth Third securities was artificially inflated during the class period.

The dates in question are October 19th 2007, through June 17th of this year. In addition to investors who may have purchased securities from Fifth Third Bankcorp during the class period, the class action is also brought on behalf of a sub-class of Class investors who may have purchased an aggregate total of $750 million worth of Trust Preferred Securities at 7.25 percent through an initial public offering effective on, or about October 25th of last year.

It is alleged that Fifth Third Bankcorp misled their investors with regard to the relevant ratios and sufficiency of its Tier 1 capital, the necessity to take charge-offs stemming from increasing credit losses, and the need to shore up capital due to the fund's exposure to poorly performing real estate markets in the Midwest.

As a result of these false and misleading statements, it is alleged that the price of Fifth Third securities was artificially inflated as compared with its actual value, during the Class period.

It is also alleged that On June 18th of this year, Fifth Third issued various statements disclosing certain adverse factors relating to Fifth Third Bankcorp and announced that it would be slashing its quarterly dividend. The result of such a diminution of dividend, it was revealed, would be a drop in earnings to anywhere between one, and five cents per share for the second quarter of 2008. The company stated further that it intended to sell subsidiaries and issue preferred stock in an effort to raise $2 billion in new capital.

These disclosures subsequently resulted in the decline in stock value of Fifth Third Bankcorp common stock, which closed on June 18th 2008 at $9.26 per share on heavy volume. That represents a stock drop of 27 percent.

Prior to the announcement, the company's stock had traded as high as $28 per share, which is the level it was at in February, just a few months ago. The subsequent, and rapid drop in stock value would have translated to some heavy losses for investors.

The proposed Class Action has yet to be certified, and the hunt is on for a lead plaintiff to represent the class. Those close to the case are confident they will identify a lead plaintiff for the Class Action prior to the August 19th 2008 deadline.

Securities fraud is serious business, in that investors are courted and their funds gleefully obtained in a relationship that is deserving of trust. Most investors are not independently wealthy scions that can afford to throw money around willy-nilly and for most, investing is not a hobby but a lifeline to their future retirement years. Not only is an unnecessary drop in stock value, and the corresponding drop in portfolio value a source of frustration, but also for many it's a source of panic.

Too few investment firms either don't realize this, or don't care.

Lawsuits ensure they are made to care.

Fifth Third Bankcorp is a diversified financial services company with a reported $111 billion in assets.

The Securities Act claim is also bought against the underwriters of Fifth Third Capital Trust VI preferred securities, Citigroup Global Markets Inc.; Merrill Lynch, Pierce, Fenner & Smith Incorporated; Morgan Stanley & Co. Incorporated; UBS Securities LLC.; Bank of America Securities LLC; and Credit Suisse Securities (USA) LLC.