Insider Selling/Undisclosed Related Party Transactions
Product or Service
This is a securities class action lawsuit against Centerline Holding Company (Centerline) and certain of its officers and directors
The securities class action lawsuit alleges that Centerline issued a series of materially false and misleading statements about Centerline's business model and financial condition, including statements concerning its portfolio of tax-exempt first mortgage bonds, which generated the majority of Centerline's revenues and supported Centerline's $1.68 per share annual dividend.
Centerline's statements concealed from the investing public that Centerline was in the midst of structuring a sale of the Centerline's mortgage revenue bond portfolio to a third party. On December 28, 2007, Centerline shocked the financial markets with a press release announcing that Centerline had sold its $2.8 billion tax-exempt affordable housing bond portfolio to a third party and, in the process, transformed Centerline's business model to a pure asset management firm.
As a result of this transaction, Centerline disclosed that it would be slashing its annual dividend from $1.68 per share to only $0.60 per share. Even more shocking was the revelation that Defendants had entered into a related party transaction with a company owned by certain of the Defendants called The Related Companies, L.P. ("TRCLP"), whereby TRCLP agreed to provide Centerline $131 million in financing, in exchange for 12.2 million shares of newly-issued convertible preferred stock that will pay Centerline insiders an 11% dividend.
In reaction to this news, the price of Centerline stock plummeted from $10.27 per share on December 27, 2007, to close at $7.70 per share on December 28, 2007, representing a 25% single-day decline, on unusually heavy trading volume of 4,152,688 shares.
Name (Stock Symbol)
Centerline Holding Company (CLNH)
Centerline Holding Company is the holding company of Centerline Capital Group. Centerline Capital Group provides real estate financial and asset management services, including institutional debt and equity fund management, mortgage banking, and primary and special loan servicing. Centerline Capital Group has more than $14 billion of assets under management.
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