August 21, 2008

On Aug. 6, 2008, STMicroelectronics NV sued Credit Suisse Group, Switzerland's second largest bank, in U.S. District Court in Brooklyn, N.Y., for fraud in allegedly placing hundreds of millions of dollars of STMicro's cash into risky auction-rate securities rather than in student-loan securities that STMicro had instructed the bank to buy.

In the complaint, STMicro wrote that it is one of more than a dozen corporate victims of a “multi-billion-dollar fraud” perpetrated by Credit Suisse’s subsidiary Credit Suisse Securities (USA) LLC and a group of its directors and brokers.

STMicro is a major semiconductor company, based in Geneva, Switzerland, whose shares are traded on the New York Stock Exchange. 

In its complaint, STMicro wrote that Credit Suisse Securities repeatedly and intentionally disregarded its instructions to invest its money in student-loan securities guaranteed by the U.S. Government. Instead, according to the complaint, Credit Suisse Securities used STMicro's funds to purchase "illiquid, risky, and unsuitable auction rate securities consisting of collateralized debt obligations and credit linked notes, some of which are backed by sub-prime real estate loans.”  None of these securities, the complaint said, was approved by STMicro for purchase. The auction-rate securities, the complaint said, became illiquid and suffered credit-rating downgrades because of the subprime crisis, causing STMicro to realize significant impairments in its financial reports.

According to the complaint, Credit Suisse Securities made "fraudulent omissions and misrepresentations" to STMicro concerning the investments that it was making with STMicro's money, "so as to minimize the risk that ST would question whether Credit Suisse Securities was purchasing unauthorized securities for its account."

Furthermore, the complaint states, ``after the illegal scheme was exposed by ST in the summer of 2007, rather than siding with customers who had been victimized, Credit Suisse Group aligned itself with its wholly owned subsidiary Credit Suisse Securities and its corrupt brokers and directors."  According to the complaint, Credit Suisse has refused to return any of STMicro's money.

The Jenner & Block team representing STMicroelectronics is made up of Partners Andrew Weissmann, Thomas C. Newkirk, and Patrick J. Trostle, and Associates Matthew W. Alsdorf, Joseph J. McFadden and Elisabeth Genn.