NEW YORK (Reuters) - Lehman Brothers Holdings Inc is being sued by two former clients for more than $190 million, alleging the failed bank deceived them about the market for auction-rate debt.
Western Digital Corp
The companies allege that Lehman knew, but failed to inform them, that the securities were "not supported by a broad, fully-functioning market."
Lehman spokeswoman Kimberly Macleod declined to comment.
A spokesman for Lake Forest, California-based Western Digital also had no comment, and a spokesman for Costa Mesa, California-based Ceradyne could not immediately be reached.
The firms are seeking to recoup funds they invested in asset-backed securities, as well as punitive damages.
Auction-rate debt has rates that reset in periodic auctions, but some brokerages told investors the debt was as good as a cash substitute. When the market froze, many investors found themselves saddled with the debt.
(Reporting by Lilla Zuill, Editing by Ian Geoghegan)