Emerson Poynter LLP

Emerson Poynter announces that a class action lawsuit has been commenced 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 - News) common stock during the period between June 24, 2005 and July 24, 2006 (the "Class Period").  The complaint charges Legg Mason and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Legg Mason, founded in 1962 and based in Baltimore, Maryland, is the fifth largest U.S.-based global asset management company.

The Class Period commences on 6/24/05 when Legg Mason announced that it would swap its brokerage unit, the business upon which the Company was founded, plus $2.1 billion in stock and cash for Citigroup Inc.'s $435 billion money-management division. Legg Mason would also buy hedge fund firm The Permal Group, one of the five largest funds-of-hedge-funds managers in the world, for an initial payment of $800 million. With these two transactions, Legg Mason would become the fifth-biggest U.S. money-management company, with $830 billion in assets. Defendants stated the acquisition would be immediately accretive to earnings as Legg Mason would realize $80 million to $115 million in cost savings.

During an investor conference call held on 6/24/05, defendants stated that these transactions would have positive effect on the Company's profitability and the "New Legg Mason" going forward, including leaving 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that defendants claimed; (c) post-acquisition cost "savings" were unattainable; (d) former Citigroup customers had withdrawn billions of dollars of assets, further driving down revenues and profits; (e) the Company's ability to achieve earnings growth (including the Company's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.

Suddenly, on May 1, 2006 the Company announced it would hold an earnings conference and release 4Q 06 financial results for the fiscal year ended 3/31/06 on 5/10/06. News of Legg Mason's less than illustrious financial results leaked into the market and the Company's stock price fell precipitously, declining more than $6 a share from over $118 to $112 per share. Thereafter, when the Company actually released its 4Q 06 results on 5/10/06, the Company's stock price plunged from over $116 per share at the close of trading on 5/9/06 to close at $101.40 on 5/12/06 - almost a $15 per share decline. Defendants made additional false but positive statements to support the Company's stock price, including stating the cost savings were still on their way in the 1Q 07. However, once again, on July 25, 2006 the Company's stock price would precipitously decline below $85 per share on very high volume when it was 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 investors had been led to expect.

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