While some investors in financial institutions and mortgage companies have had favorable rulings in their lawsuits against the firms, judges have also been issuing decisions in favor of the defendants. In one criminal case, investors sank $12 million into mortgage investments only to see their funds squandered by the firm’s president.
Great Atlantic Group Inc. Founder and President Joseph Mazella told prospective investors in Third Millennium Enterprises Inc. and 150 West State Street Corp. that he would invest their money in real estate projects, a warehouse and a golf course development project. His solicitations generated $12 million in investments. Their investments would be secured by mortgages on the properties.
But it was all a Ponzi scheme, according to the Department of Justice.
Mazella — who was arrested on April 21 on charges of securities fraud, wire fraud, and money laundering — stopped making the promised investments starting in 2007 and continuing through 2010. Instead, he allegedly used investor funds to pay personal expenses — including payments for a Porsche, a mortgage on his personal residence, and family expenses.
A conditional class certification was granted by the U.S. District Court of the Western District of Tennessee in a lawsuit against First Horizon National Corp., according to a news release from Stember Feinstein Doyle & Payne LLC. Participants in the company’s 401(k) plan are trying to recover alleged losses suffered as a result of investments in First Horizon stock and mutual funds.
The plaintiffs claim that the investments were made between Jan. 1, 2006, through July 14, 2008, even though it wasn’t prudent to do so because of the risky mortgages being underwritten at First Horizon.
A 2010 state court decision dismissing an investor class action against Countrywide Financial corp. was overturned on May 18 by a three-judge panel of California’s second appellate division, a statement from plaintiffs’ counsel Kessler Topaz Meltzer & Check indicated. The lower court had cited a lack of subject matter jurisdiction.
On appeal, investors successfully argued that the state court had improperly interpreted portions of the federal Securities Act of 1933 allowing investors to file class actions asserting claims in state court, according to Kessler Topaz — which predicted that the court of appeals would send the case back to Los Angeles Superior Court to proceed with litigation.
Bank of America Corp. last week was ordered by U.S. District Judge William Pauley to stand trial in a consolidated civil case involving alleged “dollar rolling” where the lead plaintiff is the Pennsylvania Public School Employees’ Retirement System, Reuters reported. The ruling followed the certification of a class action by U.S. District Judge Jed Rakoff in other case where the plaintiffs include the Public Employees’ Retirement System of Mississippi, the Connecticut Carpenters Pension Fund and Connecticut Carpenters Annuity Fund, the Los Angeles County Employees Retirement Association and Wyoming State Treasurer Joseph Meyer.
Freddie Mac announced in April that a federal putative class action lawsuit filed by shareholders in U.S. District Court for the Southern District of New York during August 2008 has been dismissed. Judge John Keenan reportedly found that all alleged misstatements and omissions regarding Freddie’s involvement in the subprime and Alt-A mortgage markets were not actionable. The judge held that the plaintiffs failed to adequately plead that Freddie’s disclosures on those issues were either false or misleading.
The U.S. Court of Appeals for the Fourth Circuit affirmed a lower court decision that Freddie’s shareholders cannot sue the government-controlled enterprise because the Federal Housing Finance Agency substituted itself as plaintiff, Bloomberg reported. The FHFA was able to step in as plaintiff based on a 2008 law that gave all rights previously held by stockholders to the FHFA.
A shareholder lawsuit filed in U.S. District Court for the Southern District of New York against Citigroup Inc. and more than a dozen of its current and former executives was dismissed, Reuters reported. Judge Sidney Stein, who first dismissed the case in August 2009, said the plaintiffs erred in failing to first approach bank directors to take action on their behalf over the alleged wrongdoing.
But two other lawsuits filed in the same federal court in Manhattan — one by William Fitzpatrick and the other filed by Michael Brautigam — claim that the board ignored shareholder warnings then refused to take action, according to Westlaw Journals. An April 13 consent order with the Office of the Comptroller of the Currency was accompanied by a report that reportedly confirmed the flaws in loan servicing, risk management and foreclosure policies.
The U.S. District Court for the Western District of Washington was notified in April that Washington Mutual Inc. and shareholders who sued the company were close to a settlement, the Puget Sound Business Journal reported. The lawsuit was filed in 2007.
Bloomberg also reported that a federal judge reversed a $2.41-per-share jury award against BankAtlantic Bancorp Inc. U.S. District Judge Ursula Ungaro noted in her 122-page opinion that shareholder losses could have been the result of changed economic circumstances.
JOHN YOST and GERALD SANDERS, individually and on behalf of all others similarly situated, Plaintiffs, v. FIRST HORIZON NATIONAL CORP., et al., Defendants.
Case No. No. 08-2293-STA-cgc (U.S. District Court for the Western District of Tennessee).
DAVID H. LUTHER et al., Plaintiffs and Appellants, v. COUNTRYWIDE FINANCIAL CORPORATION et al., Defendants and Respondents.
Case No. B222889 (Court of Appeals of California, Second District, Division Five).
In re: Citigroup Inc Shareholder Derivative Litigation.
Case No. 07-09841 (U.S. District Court, Southern District of New York).
Fitzpatrick v. Rubin et al.
Case No. 11-2822, Apr. 26, 2011 (U.S. District Court, Southern District of New York).
Brautigam v. Rubin et al.
Case No. 11-2693, Apr. 20, 2011 (U.S. District Court, Southern District of New York).
Louisiana Municipal Police Employees Retirement System v. Federal Housing Finance Agency.
Case No. 09-01973 (U.S. Court of Appeals for the Fourth Circuit).
In re BankAtlantic Bancorp Inc. Securities Litigation.
Case No. 07-cv-61542 (U.S. District Court, Southern District of Florida).