Allied Capital may have misled investors about its underwriting criteria for SBA loans thereby misrepresenting the quality of loan on its balance sheet,

This is a securities fraud class action lawsuit against Allied Capital Corp. and certain officers and directors.

Allied Capital is a principal investment firm specializing in buyouts, acquisitions, recapitalizations, note purchases, growth capital, and middle market investments. Allied Capital also provides debt financing in the form of senior loans, second lien debt, subordinated debt, and unitranche facilities. Allied Capital's Business Loan Express (BLX) subsidiary originates, sells and services primarily real estate-secured small business loans, and also provides small business loans which are guaranteed pursuant to the U.S. Small Business Administration's (SBA) Section 7(a) Guaranteed Loan Program. BLX is Allied Capital's second largest portfolio company, and in 2005 BLX provided approximately 10.0% of Allied Capital's total interest and related portfolio income.

The securities class action lawsuit alleges that Allied Capital failed to disclose, among other things, that Allied Capital's BLX subsidiary fraudulently procured and provided SBA-backed Section 7(a) loans to borrowers who were ineligible to receive such loans. As a result, defendants misrepresented and failed to disclose to investors material adverse facts concerning Allied Capital's financial condition and prospects.