As class actions against two financial institutions were dismissed, new investor litigation is increasingly tied to mortgage securities.
An amended consolidated claim was filed on Feb. 20 in U.S. District Court for the Southern District of New York alleging that Citigroup Inc. “concealed the true facts by the use of shamelessly fraudulent schemes,” a June statement from Tramont Guerra & Nunez PA said. The company allegedly represented that mortgage-related securities risks it faced had been eliminated, spread or hedged.
Tramont said it also filed an individual multi-million dollar securities arbitration claim with the Financial Industry Regulatory Authority against Citigroup alleging an unsuitable concentration in Citigroup investments. The firm said that “while the financial banking system collapsed, Citigroup gave no advice to mitigate risk to the claimant.”
A class action has been filed against SunTrust Banks Inc. in U.S. District Court for the Northern District of Georgia, Berger & Montague, P.C., recently announced. The case was filed on behalf of investors who purchased SunTrust Capital IX 7.875% Trust Preferred Securities and — like most investor lawsuits — alleges violations of the Securities Exchange Act of 1933.
In its registration statement for the securities, SunTrust allegedly failed to disclose the impaired nature of its mortgage-related securities and overstated its capital position.
Several securitizations issued between March 2006 and April 2007 by Structured Asset Mortgage Investments II Inc. are defendants in a lawsuit filed in U.S. District Court for the Southern District of New York, according to a news release from Coughlin Stoia Geller Rudman & Robbins LLP. Issuances from Bear Stearns are also named as defendants.
Structured Asset, which was created by Bear Stearns & Co. Inc. to issue RMBS, along with its officers and The Bear Stearns Companies Inc., allegedly misled investors in a March 6, 2006, registration statement about the quality of the underwriting and appraisals on the underlying loans.
A settlement between Countrywide Financial Corp. and employees has been tentatively approved by a federal judge, according to court records. The class action alleged violations of the Employee Retirement Income Security Act of 1974, or ERISA. Class members include participants in Countrywide’s 401(k) savings and investment plan who bought or sold Countrywide securities through the plan between Jan. 31, 2006, and July 1, 2008.
Bank of America Corp. unsuccessfully tried to make a federal case out of a dispute with mortgage-backed securities holders. The class action was filed on Dec. 1, 2008, in New York’s state supreme court and revolved around an $8.4 billion predatory lending settlement with several states for loans closed by Countrywide Financial Corp., which BoA acquired last year. The cost of modifying loans as required by the settlement is being passed on to MBS investors.
A federal judge denied BoA’s request to move the case to federal court, published reports indicate.
A class action filed against BoA subsidiary Merrill Lynch in U.S. District Court for the Eastern District of Pennsylvania has been dismissed, The Legal Intelligencer reported. U.S. District Judge R. Barclay Surrick reportedly said the plaintiffs had no facts to support claims that misrepresentation in 2005, and not a “profound” downturn in the mortgage market, was the cause of their losses. The plaintiffs’ MBS investments were $26 million.
A class action against Downey Financial Corp. in the U.S. District Court for the Central District of California has been dismissed because the plaintiffs couldn’t prove the defendants misled investors, The National Law Journal reported. The case had been consolidated earlier this year.
Russian billionaire Len Blavatnik was planning to sue JPMorgan Chase & Co. over $98 million in losses suffered by his Access Industries because the bank allegedly said it was conservatively investing for the firm in subprime securities even though it was unwinding its own positions, the New York Times reported.
A $314 million lawsuit filed by Line Trust Corp. and Deuce Properties Ltd. against Cerberus Capital Management LP and Centerbridge Partners LP accuses them of inducing Extended Stay Hotels chief David Lichtenstein to throw the firm into bankruptcy on June 15 to squeeze out junior lien holders, Bloomberg reported. The defendants offered inducements by promising to indemnify Lichtenstein against $100 million in liabilities that he faced in the event of an Extended bankruptcy, according to the plaintiffs — which together purchased $214 million in Extended Stay debt.
Defendants in securities lawsuits can turn to the law firm of Greenberg Traurig LLP, which announced the hiring of Jan L Handzlik for its litigation group. Handzlik specializes in white-collar criminal defense and complex business litigation.
The Securities and Exchange Commission recently announced that it charged 10 stock brokers who were with defunct Broookstreet Securities Corp. with falsely marketing investments in MBS derivatives as safe and suitable for retirees and others with conservative investment goals. The case was filed in U.S. District Court for the Southern District of Florida.
