New investor class actions include two filed on behalf of mortgage-backed securities certificate holders and one accusing a Puerto Rican institution of fraud. Two class action settlements were reached, and five cases against a mortgage insurer were consolidated into one.
A class action lawsuit was filed in U.S. District Court for the Southern District of New York on May 14 on behalf of investors who purchased certain IndyMac mortgage-backed securities issued in 2006 and 2007, according to a joint announcement from Kohn, Swift & Graf P.C. and Wolf Haldenstein Adler Freeman & Herz LLP. Named as defendants are IndyMac MBS Inc., some of its officers and directors, underwriters and certain ratings agencies.
IndyMac is accused of routinely disregarding its underwriting guidelines. As loan performance deteriorated, ratings agencies downgraded the certificates because their original ratings didn’t accurately reflect projected delinquencies.
As is typical in securities class actions, the defendants were accused of violating the Securities Act of 1933.
Morgan Stanley Capital and some of its officers are being sued in U.S. District Court for the Southern District of New York on behalf of investors of MBS issued in 2006 and 2007, Coughlin Stoia Geller Rudman & Robbins LLP said in a press release. At issue are registrations statements issued in late 2005 and early 2006 that allegedly did not disclose that many of the loans were stated-income with borrowers who could not afford the payments.
An amended complaint was filed in an investor class action against Freddie Mac by Coughlin Stoia in U.S. District Court in Manhattan on May 19, Reuters reported. Named in the complaint are former chief executive officer Richard Syron, former chief financial officer Anthony Piszel and former chief business officer Patricia Cook.
The defendants are reportedly accused of issuing misleading statements, hiding capital adequacy problems and manipulating financial results and accounting practices. The case reportedly cites interviews with more than 100 former company employees, including an unnamed former director of operational risk management and a former vice president of investor relations.
On its Web site, Coughlin Stoia, boasts about its win in a securities class action against Household International. A partner with the firm was quoted as saying they won the case “despite facing adversaries with tremendous power and resources.”
Investors of Popular Inc. securities between Jan. 23, 2008, and Jan. 22, 2009, filed a class action on May 15 in U. S. District Court for the District of Puerto Rico, Dyer & Berens LLP announced. The company allegedly failed to dislose the true condition of its loans.
A class action against Luminent Mortgage Capital Inc. on behalf of common stock investors from Feb. 9, 2007, to Aug. 6. 2007, has been settled for $8 million, Lowey Dannenberg Cohen and Hart P.C. announced last month. Luminent filed for relief under Chapter 11 of the U.S. Bankruptcy Code in September 2008.
“Luminent senior officers, which invested in mortgage-backed securities and mortgage loans, falsely represented Luminent’s ample liquidity, exposure to subprime debt and the safety of its upcoming dividend payment,” Lowey Dannenberg stated. “These bullish representations were alleged to have invited investors’ confidence just weeks before the Company disclosed a credit crisis and suspended its dividend in early August 2007, which resulted in an immediate 85% decline in the value of its stock.”
In its first-quarter earnings report, MGIC Investment Corp. disclosed that five stockholder class action lawsuits filed against it last year were consolidated into one action in March. Other defendants in the cases include the mortgage insurer’s officers and one officer of Credit Based Asset Servicing. MGIC — which wrote off its entire investment in C-BASS — and the other defendants are accused of misrepresenting the liquidity of C-BASS and the impairment to its investment.
“We believe, among other things, that the allegations in the complaints are not sufficient to prevent their dismissal and intend to defend against them vigorously,” MGIC said.
MGIC also said it could face litigation from a December 2008 class action against C-BASS filed by MBS investors. Language in the complaints suggests MGIC could be one of the unnamed defendants.
In addition, two law firms have announced ongoing investigations on behalf of 401 (k) plan participants that could lead to litigation.
Police and Fire Retirement System of the City of Detroit, v. IndyMac MBS, Inc., et al.
Case No. 09 CIV 4583, May 14, 2009 (U.S. District Court for the Southern District of New York)
West Virginia Investment Management Board, Individual and On Behalf of All Others Similarly Situated, Plaintiff, vs. Morgan Stanley Capital I Inc., et al.
(U.S. District Court for the Southern District of New York)
Russell Hoff, Individually and on Behalf of All Others Similarly Situated, Plaintiff, vs. Popular Inc., Richard Carrion and Jorge A. Junquera, Defendants.
May 15, 2009 (U. S. District Court for the District of Puerto Rico).
