Pomerantz Appointed Co-Lead Counsel in Investor Suit Against PacWest Bancorp

Pomerantz was recently named Co-Lead Counsel in a shareholder suit against PacWest Bancorp. The suit alleges that PacWest misled investors about the company’s financial situation and the effect that increases in interest rates would have on its liquidity.

PacWest Bancorp is a regional bank headquartered in Los Angeles, CA. According to the complaint, from 2019 to 2021 PacWest’s business experienced a significant growth, with deposits increasing 81% during that span. The class period in the case stretches from February 28, 2022, to May 10, 2023. Over that time the defendants repeatedly assured investors that the bank had robust and effective risk management protocols. Part of this protocol included maintaining a liquidity ratio of 40%, based on a $14 billion “Available for Sale” portfolio. However, over the course of the class period, as the Federal Reserve raised interest rates to combat rising inflation, the value of that portfolio plummeted, reducing PacWest’s liquidity ratio to 20%. Rather than correct course, the bank stopped reporting its liquidity ratio altogether. Rising interest rates were posing a risk to the bank’s stability, however, instead of alerting investors to these risks, PacWest allegedly claimed that this would actually benefit the bank’s finances. In March of 2023, spurred by turmoil at Silicon Valley Bank and Signature bank, among others, customers began withdrawing deposits from PacWest. As this came to light, and articles in Bloomberg and Forbes questioned the stability of the bank, highlighting its need to tap federal lending to remain in business, PacWest’s share price dropped precipitously. The suit alleges that PacWest failed to disclose these material risks to investors, damaging shareholders when the truth was revealed.