An eight-year case sought justice for economic collapse
By Tony Flesor
LAW WEEK COLORADO
For the attorneys at Burg Simpson, a lawsuit against UBS and Moody’s was a case of David versus Goliath.
According to Michael Burg, Burg Simpson founder and shareholder, the lawsuit was the “first filed and the last standing” against the major investment bank and credit rating agency or against similar parties. The lawsuit claimed that the two organizations were involved in misrepresenting the value of collateralized debt obligations, or CDOs, and selling them to make a profit. The practice was largely credited with the economic recession, and according to Burg, the two financial institutions alone could have contributed to a $7 trillion hit to the global economy, had the practice continued.
The case opened in 2007 after Connecticut-based hedge fund Pursuit Partners claimed that UBS sold CDOs rated as investment grade, and within 90 days of the sale Moody’s and S&P downgraded the securities to “junk” status, essentially revealing them as fool’s gold and completely devaluing tens of millions of dollars in investments. According to Burg Simpson partner Dave Teselle, the securities were supposed to pay out on their own for years, but instead were rendered worthless overnight.
Michael Burg’s son Scott, an employee at Pursuit Partners, told him that the hedge fund thought it was taken advantage of and that none of the New York law firms it reached out to were willing to take up the case. Burg said that at the time, the Burg Simpson lawyers “didn’t know a CDO from a COD” but after taking a first look at documents, it appeared the hedge fund had a claim.