Corporate & Securities Law

The Main Street Natural Gas Bond Debacle

By Mark Maddox

The story of Main Street Natural Gas Bonds serves as an invaluable lesson on the Wall Street-Main Street connection. Marketed as a supposedly ?safe? investment, Main Street Natural Gas Bonds have spurned a cadre of lawsuits from investors who allege that brokerage firms misrepresented the safety of the bonds and omitted other key material facts about them. 

Among those facts: The Main Street Natural Gas Bonds shared very little in common with the safety of traditional municipal bonds. That?s because the Main Street bonds were connected to a gas supply contract of Lehman Brothers Holdings. When Lehman Brothers filed for bankruptcy protection in September 2008, the fate of the bonds was immediately put into jeopardy because their ?safety? depended on the fiscal viability of Lehman Brothers.

In turn, individual and institutional investors were subsequently wiped out after Lehman?s commodities unit stopped delivering gas to the nonprofit corporation. 

Many of the investors who purchased Main Street Natural Gas Bonds did so because they were looking for a safe, tax-free income-producing investment backed by a municipality. What they got was far different than what they had in mind. 

The Financial Industry Regulatory Authority (FINRA) has launched an investigation into whether banks and brokerages that sold various issues of Main Street Natural Gas Bonds were forthcoming with investors about the true state of Lehman Brothers? deteriorating financial condition. 

?One interesting firm ran a bunch of senior citizens? sales seminars where they promoted these particular bonds as good,? said Malcolm Northam, FINRA?s director of fixed income securities, in a Sept. 24 Bloomberg article. ?Maybe they were, at the time they were promoted. I don?t know. It raises interesting questions.? 

It?s also raising lawsuits. One Florida investor sued a broker, claiming the Main Street bonds were falsely touted as general obligation bonds guaranteed by the state of Georgia. 

If you invested in Main Street Natural Gas Bonds, you may have a viable claim to recover any investment losses you suffered following Lehman?s bankruptcy. Please contact our firm to tell us your story.

Full post as published by Representing Investors on January 16, 2010 (boomark / email).