Pittsburgh Law Office of Alfred G. Yates Jr., PC Files Class Action Suit against Legg Mason Inc. on Behalf of Investors - LM

Business Wire, Oct 23, 2006

PITTSBURGH -- Notice is hereby given by the Law Office of Alfred G. Yates Jr., PC that it has filed a class action lawsuit in the United States District Court for the Southern District of New York on behalf of purchasers of Legg Mason, Inc. ("Legg Mason" or the "Company") (NYSE:LM) common stock during the period between June 24, 2005 and July 24, 2006 (the "Class Period").

If you wish to serve as lead plaintiff, you must move the Court no later than December 15, 2006. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff's counsel, Alfred G. Yates, Jr. at 1-800-391-5164 (toll free) or via e-mail at yateslaw@aol.com. Any member of the purported class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.

The Complaint alleges that on 6/24/05, Legg Mason announced that it would swap its brokerage unit plus $2.1 billion in stock and cash for Citigroup's $435 billion money-management division and would buy hedge fund firm The Permal Group. Defendants stated the acquisition would be immediately accretive to earnings, have a positive effect on profitability and leave Legg Mason with a "Conservative Balance Sheet." According to the complaint, throughout the Class Period, defendants continued to paint a picture of continued growth and success for the future. In fact, Legg Mason's business was failing miserably, as: (a) Legg Mason was unable to successfully integrate Citigroup's worldwide asset management business ("CAM") assets because of a lack of compatible corporate infrastructures; (b) the Company's acquisition of the CAM assets was not the success defendants claimed - Citigroup had undisclosed pre-existing sales expenses to a third-party brokers, so there was little or no possibility of achieving the combined (post-acquisition) projections that defendants claimed; (c) post-acquisition cost "savings" were unattainable; (d) former Citigroup customers had withdrawn billions of dollars of assets, further driving down revenues and profits; (e) the Company's ability to achieve earnings growth (including the Company's projections for fiscal 2006 and beyond) was severely strained, due to deteriorating investment returns on Bill Miller's $18.7 billion Legg Mason Value Trust, the Company's flagship equity fund which was having its worse year since 1990 and was trailing the S&P 500 for the first time in 16 years; and (f) the diminishing returns on Miller's flagship fund were causing further margin pressure. As a result, the Company's projections for fiscal years 2006 and 2007 were grossly inflated.

On July 25, 2006 the Company disclosed that the CAM acquisition costs were spiraling and customers were withdrawing funds, putting further pressure on revenues and margins and causing Legg Mason to miss the earnings targets for 1Q 07. On this news, stock price fell to below $85 per share.