A federal judge from the the U.S. District Court, Southern District of New York yesterday approved a $40 million settlement in an MBS class action lawsuit against individuals formerly affiliated with Lehman Brothers Holding. The company went bankrupt in September 2008.

Led by Locals 302 and 612 of the International Union of Operating Engineers, which include Employers Construction Trust Fund, New Jersey Carpenters Health Fund, and Boilermakers-Blacksmith National Pension Trust, the plaintiffs in the lawsuit were represented by Cohen Milstein Sellers & Toll.

Judge Lewis Kaplan's final approval of the agreement ends four years of litigation against the individuals who were formerly part of Lehman. They were charged with filing misleading Offering Documents about the credit quality of billions of dollars worth of MBS issued in 2006 and 2007.

“While this settlement by no means compensates investors for the full amount of their damages, we believe it is an excellent result given the bankruptcy and limited insurance funds available,” said plaintiffs’ lead counsel Steven J. Toll, of Cohen Milstein.

Under the settlement's terms, the Lehman Brothers Estate will pay $8.3 million and insurers for the firm’s officers and directors will pay the remaining $31.7 million.

Meanwhile, class members have until Aug. 20 to file their settlement claims. Aside from the lead and named plaintiffs, the Iowa Public Employees’ Retirement System and Public Employees’ Retirement System of Mississippi also intervened in the action on behalf of the other investors.

The case is called In re Lehman Brothers Mortgage-based Securities Litigation, No. 08-CV-6762

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