Investors suing Washington Mutual Inc., the former owner of the biggest U.S. bank to fail, won certification as a class-action case of their suit alleging shoddy lending practices. U.S. District Judge Marsha Pechman in Seattle ruled that shareholders who lost money on stock purchased from October 2005 to July 2008 can proceed with claims under a single lawsuit. The judge appointed the New York-based law firm Bernstein Litowitz Berger & Grossmann to lead the Plaintiffs’ case. The lawsuit consolidates more than 20 cases filed against Washington Mutual that claim the bank secretly lowered lending standards, artificially inflated home-price appraisals and failed to disclose its deteriorating financial condition when the loans began to fail.
The named Plaintiffs in the case include Ontario Teachers’ Pension Plan Board, the largest single-profession pension plan in Canada, and four other pension groups. They seek to represent tens of thousands of shareholders who lost money on three types of preferred stock purchased between October 2005 and July 2008 and certain securities offered by the bank in 2006 and 2007. The shareholders contended that the case should be granted class-action status because their claims are typical of what other investors experienced and are based on common legal issues.
WaMu filed for bankruptcy September 26, 2008, the day after its banking unit was taken over by regulators and sold to JPMorgan Chase for $1.9 billion. Before it failed, Washington Mutual Bank had more than 2,200 branches and $188 billion in deposits. Judge Pechman ruled on September 28th that a separate federal shareholder lawsuit in Seattle claiming the bank misled purchasers of $10.8 billion in mortgage-backed securities could proceed.
Source: Seattle Times
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