In Re MDC Holdings Securities Litigation

MEMORANDUM DECISION AND ORDER

Several actions have been consolidated in this class action and shareholder derivative suit. Plaintiffs Flora Masry, Markleebeth, Inc., Milton Hollander, Morton Gordon, and William Boyle allege seven causes of action based on federal securities laws and state common law. MDC Holdings, Inc. is engaged in real estate development, sales, and financing businesses. Drexel Burn-ham Lambert is MDC’s underwriter and investment banker, and Touche Ross & Co. is MDC’s accountant. Plaintiffs allege that the three groups of defendants (MDC, Drexel, and Touche) issued a series of favorable public statements about the financial performance, management, and future business prospects of MDC which were materially false and misleading. These statements allegedly operated to inflate artificially the market price of MDC securities during the time plaintiffs purchased stocks and bonds (April 1, 1985 to April 6, 1989).

The Securities and Exchange Commission (“SEC”) investigated the transactions and reports. On May 18, 1988, MDC began to reveal adverse facts about the SEC’s investigation of the accounting for certain transactions, the actual corporate losses, and the…