Securities Litigation - Written by Beasley Allen on Wednesday, October 6, 2010 14:14 - 0 Comments
Countrywide Financial Corp. has agreed to pay $600 million in the largest settlement so far of shareholder lawsuits arising out of the mortgage meltdown. The agreement, given preliminary approval on August 2nd by a federal judge in Los Angeles, would end several class actions brought on behalf of investors in Countrywide stock. Countrywide, once the nation’s largest mortgage lender, offered a full range of loans to customers whose credit varied from top flight to subprime. It was near failure when Bank of America Corp. acquired it in 2008. Countrywide had fraudulently concealed its mounting risks as it and other lenders embraced ever-looser standards during the housing boom.
Countrywide’s outside accounting firm, KPMG, which signed off on the lender’s financial statements at the height of the boom in 2005 and 2006, has also agreed to pay an additional $24 million under the settlement. The settlement actually benefits a number of former Countrywide executives and directors who were also named as Defendants in the litigation and who won’t have to help fund the payments to shareholders. The settlement also would clear the liability of a list of financial firms that underwrote the Countrywide stock offerings and were named as Defendants.
The settlement was the result of long mediation by my good friend Eric Green, a Boston University law professor, and A. Howard Matz, a federal district judge in Los Angeles. This is the largest settlement of any shareholder case to come out of the subprime crisis this far.
It should be noted that the settlement doesn’t cover investments in mortgage-backed securities sold by Countrywide. The company also is still defending several other lawsuits and investigations, including a Securities and Exchange Commission civil lawsuit accusing Countrywide officers of misleading investors. Countrywide and Angeles Mozilo, longtime CEO, also are under criminal investigation by the Justice Department and are targets of lawsuits brought on behalf of borrowers by the Attorneys General of California and other states. I’m not sure how many individual investors will benefit from the pending settlement. If the court gives final approval at a hearing in November, payments should go out within six months to a year. Joel H. Bernstein, a lawyer with the firm of Labaton Sucharow, located in New York City, represented the New York state and city pension funds that were the lead Plaintiffs in the case. He and his firm did an outstanding job in this case.
Source: Los Angeles Times
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