Ashland Chemical Company, Inc., the maker of Valvoline motor oil, filed a lawsuit against Oppenheimer & Co., in 2009 for the sale of nearly $194 million worth of auction rate securities during 2007 and early 2008. According to the complaint by Ashland Inc., Oppenheimer misrepresented the risks and liquidity related to the securities
When the market for auction-rate securities collapsed in February 2008, Ashland, like thousands of institutional and retail investors, found itself stranded with an illiquid investment that no one wanted to buy. Several months later, in an effort to settle investigations by state and federal regulators, many Wall Street firms, including Citigroup, UBS and Merrill Lynch, agreed to buy back billions of dollars of auction-rate securities from investors. Oppenheimer, however, opted not to participate in the ARS buy-back programs, contending it didn’t issue or underwrite the securities but only sold them.
Ashland filed its lawsuit against Oppenheimer on April 17, 2009 in the U.S. District Court for the Eastern District of Kentucky. Prior to this in November 2008, Massachusetts’ Secretary of State William Galvin sued the firm and charged them with fraud and dishonest and unethical conduct in connection to its auction-rate securities business. Galvin requested that Oppenheimer rescind all sales of auction-rate securities and make full restitution to investors who already had sold their securities. In addition, Galvin also sought to fine the company and several senior-level executives, specifically Oppenheimer Chairman and CEO Albert Lowenthal, whose broker-dealer license he wanted revoked.