Bankruptcy Lawsuits

However, Miller’s claims of fraud against Greenwich were tossed out by Judge Mary Walrath.

Miller accused Greenwich of fraud for receiving nearly $16 million in fees for providing credit to American Business Financial during the bankruptcy. Greenwich also bought assets that included loan servicing rights during the Chapter 11 bankruptcy case.

“The court concludes that the trustee has failed to plead a claim of common law fraud on the court,” Walrath wrote in the 37-page opinion. “The court will dismiss the common law fraud.”

But Walrath is allowing Miller to move forward with his lawsuit accusing seven former officers and directors of Greenwich of breeching their fiduciary duty and conflicts of interest in the case.

In court papers, Miller claims Greenwich undersold assets and “remained mute” about the asset’s true value. Ocwen is accused of aiding and abetting Greenwich in its alleged deception.

“The court concludes that the trustee has stated a claim for aiding and abetting a breach of fiduciary duty,” Walrath ruled. “Accordingly, the court will not dismiss this claim against Greenwich.”

In court filings Greenwich and Ocwen have denied wrongdoing.

The ruling could be good news for creditors seeking payment before Greenwich gets money from the Chapter 11 bankruptcy.

The judge is also allowing Miller to continue to try and prove some of fraud charges she dismissed involving Greenwich’s management and board.

“To the extent the trustee can establish in this case that those officers and directors breached their fiduciary duty and that Greenwich aided and abetted them, the court can grant appropriate relief against Greenwich,” the judge said.

American Business Financial Services filed for bankruptcy in 2005. Thousands of investors who bought notes from the company are still owed up to half a billion dollars.

In an unrelated case, Washington Mutual, National City, Countrywide Home Loans and several other lenders are facing court scrutiny over the loans they made to NJ Affordable Homes.

Securities regulators alleged the owner of NJ operated a mortgage financing scam that took in 490 investors — promising as much as 20 percent returns. The agency filed an emergency action to halt the “fraudulent unregistered offerings of securities and an ongoing Ponzi scheme” orchestrated by NJ, according to a written statement the federal agency issued at the time.

NJ’s bankruptcy trustee filed about 250 complaints in bankruptcy court against the lenders who approved loans to NJ and against the investors who allowed NJ to put properties in their names.

The trustee alleged lenders ignored numerous warning signs in the lending process and failed to conduct due diligence. The lenders were also accused of violating their own internal guidelines in making the loans.