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Newman Ferrara LLP announces that a class action lawsuit has been commenced in the United States District Court for the District of Puerto Rico on behalf of purchasers of Doral Financial Corp. (“Doral” or the “Company”) (NYSE:DRL) common stock during the period between April 2, 2012 and May 1, 2014 (the “Class Period”). The complaint charges Doral and certain of its officers and directors with violations of the Securities Exchange Act of 1934.
Investors who purchased Doral common stock during the Class Period may apply with the Court to be appointed lead plaintiff no later than July 14, 2014. The lead plaintiff will direct the litigation on behalf of the other class members.
Doral, based in San Juan, Puerto Rico, is holding company for Doral Bank, which provides retail banking services in Puerto Rico and elsewhere. The complaint alleges that during the Class Period, the Doral defendants knowingly issued materially false and misleading statements and/or failed to disclose material adverse facts, including that: (a) Doral had a material weakness in its internal controls over financial reporting and disclosure controls; (b) because the Company had under-reserved for loan losses, the Company’s assets and net income were overstated, and its expenses were understated; and (c) that Doral Bank did not meet its Tier I regulatory capital requirements as required by bank regulators.
On May 1, 2014, after the close of trading, the Company filed a Current Report on Form 8-K with the SEC disclosing that the Puerto Rican government was disputing whether a purported tax receivable due Doral, which accounted for $289 million of the bank's $679 million of so-called Tier 1 capital as of the end of fiscal 2013, was indeed payable, and that the U.S. Federal Deposit Insurance Corporation (“FDIC”) had advised Doral that it could not include the tax receivable in its Tier 1 capital ratio, rendering the bank significantly undercapitalized. Doral also disclosed that the FDIC had ordered the Company to revise its capital plan which could force the Company to sell assets. On this news, the price of Doral's shares dropped more than 60%, plummeting from a previous day close of $9.82 to close at $3.73 per share on heavy trading volume.