Among several investor lawsuits to recently see legal action were cases where criminal charges were filed. In one case, the defendants are also accused of more than $100 million in mortgage fraud.
An executive order creating interagency Financial Fraud Enforcement Task Force intended to strengthen efforts to combat financial crime was announced by the Obama Administration last month. Led by the U.S. Department of Justice, the task force will “investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets and recover proceeds for victims.”
Earlier this month, the law firm of Tramont Guerra & Núñez, P.A., announced that a class action was filed on Oct. 10 in U.S. District Court for the Eastern District of Pennsylvania on behalf of investors that traded common shares of Advanta Corp. between Oct. 31, 2006, to Nov. 27, 2007. The company is accused of misleading investors about its financial condition and the performance of its portfolio.
Settlements have been proposed in a class action by shareholders of American Home Mortgage Investment Corp. who owned the stock between July 19, 2005, and Aug. 6, 2007, according to a Nov. 10 news release. The case is pending in U.S. District Court for the Eastern District of New York.
Regions Financial Corp. faces a lawsuit recently filed in U.S. District Court for the Northern District of Alabama by investors who purchased shares between Oct. 3, 2006, and Nov. 4, 2006, the Shareholders Foundation Inc. announced in October.
“Regions and several of its current and former officers and directors violated Federal securities laws by allowing or authorizing the solicitation of proxies or consent to a resolution approving a merger/acquisition between Regions and AmSouth, another Birmingham-based bank, in October 2006, through the use of a materially misleading joint proxy statement,” the press release indicated. “The complaint alleges that the joint proxy statement, which urged shareholders to vote for the acquisition, omitted material facts about and/or falsely misrepresented AmSouth’s and Regions’ financial condition.”
Regions reportedly disclosed in January 2009 that it would write down $6 billion in goodwill tied to the AmSouth acquisition.
Federal and state prosecutors filed a 249-count securities fraud complaint against seven defendants tied to Pacific Wealth Management and Stonewood Investments in Riverside County Superior Court in California, an announcement last month indicated. The defendants are James Benjamin Duncan, Hendrix Moreno Montecastro, Helen Moreno Pedrino, Maurice McLeod, Charlie Sung Muk Choi, Cindi Gayle Kelly and Thuan Nhan Du.
The defendants allegedly sold fraudulent securities that lead to $17 million in losses. Victims were solicited through online advertisements, investment seminars and word of mouth. They are accused of grand theft, elder abuse and corporate ID theft as well as $125 million in mortgage fraud. Three other defendants have already pleaded guilty.
“Duncan, who billed himself as ‘James the Cash King’ in a series of online videos, would promise high yield for his victim’s investments while he pocketed $19 million for himself by failing to provide his promised returns,” the statement said. “Duncan operated similar investment scams in Iowa, Wisconsin and Washington.”
Meredith, N.H.-based Financial Resources Mortgage Inc. allegedly defrauded investors of $18 million in a Ponzi scheme before it recently failed, according to published reports. The company, as well as CL&M Inc., was forced into involuntary bankruptcy late last month in U.S. Bankruptcy Court in Manchester. A dozen lawsuits have been filed in Merrimack County Superior Court and Belknap County Superior Court, and investors are seeking more than $23 million.
Even office clerks at Financial Resources are accused of aiding in the scheme. Scott Farah is chief executive officer of the company.
A lawsuit filed in U.S. District Court in Seattle can continue against former Washington Mutual Inc. executives including former CEO Kerry Killinger, former chief financial officer Thomas Casey and former home loans president David Schneider, according to the Seattle Times. Also named as defendants are former chief operating officer Stephen Rotella and former chief enterprise risk officer Ronald Cathcart.
The case, which seeks class action certification, alleges securities fraud as a result of alleged misrepresentation of lending practices and standards as well as inflating appraisals. An earlier complaint had been rejected because it failed to identify specific claims of fraud. Trial is set for May 2, 2011.
Investors in securities lawsuits have little chance of collecting damages from officers and directors who enabled big subprime investments, Bloomberg quoted XL Capital Ltd. CEO Michael McGavick as recently saying. XL insures officers and directors.
In re. Advanta Corp.
Case No. 09 CV 04730, Oct. 10, 1009 (U.S. District Court for the Eastern District of Pennsylvania)
In re. American Home Mortgage Securities Litigation.
07-MD-1898 (TCP), (U.S. District Court for the Eastern District of New York)
In re. Pacific Wealth Management and Stonewood Investments.
District Attorney’s case No. RIF153306 (Riverside County Superior Court).
