In re Washington Mutual, Inc., Securities Litigation
Court: United States District Court, Western District of Washington
Case Number: 07-cv-1809
Judge: Hon. Marsha J. Pechman
Case Contacts: Chad Johnson, Hannah Greenwald Ross, Jerald Bien-Willner, Katherine McCracken Sinderson
“Securities class action filed on behalf of investors in Washington Mutual, Inc. (“Washington Mutual” or the “Company”) against the Company, certain of its directors and executive officers, its auditor Deloitte & Touche LLP (“Deloitte”), and several major financial institutions (the “Underwriters”) that underwrote the Company’s securities offerings during the Class Period.
Until it was forced to declare bankruptcy on September 26, 2008 after its banking subsidiary was seized by federal regulators, Washington Mutual was one of the nation’s largest originators and servicers of residential mortgages. The Company had long represented itself to be a traditional low-risk depository institution and mortgage lender. In reality, in recent times and particularly in 2006 and 2007, it is alleged that Washington Mutual increasingly focused on high-risk and experimental mortgage products, while secretly abandoning proper standards of managing, conducting and accounting for its business. For example, as alleged in a recent complaint filed by the Attorney General of the State of New York concerning First American Corporation’s eAppraiseIT subsidiary, Washington Mutual elicited fraudulent appraisals from eAppraiseIT in order to increase its loan volume and further grow its mortgage lending business. As alleged, this wrongful practice, among others, including the improper accounting for the Company’s mortgage loans and deficient internal controls, caused the Company to defraud the investing public by issuing false and misleading financial statements and misrepresenting the nature of the Company’s lending business.
In 2006 and 2007, with the direct participation of the Underwriters and Deloitte, the Company was able to raise nearly $5 billion through four securities offerings. Each participant in Washington Mutual’s securities offerings, including the Underwriters and Deloitte, were obligated by law to ensure that the statements made to investors in the offering materials were not false. However, in offering these securities, neither the Company, its officers, its Board of Directors, Deloitte, nor the Underwriters disclosed the hidden weaknesses in the Company’s lending practices and accounting policies. Rather, as alleged in the Amended Consolidated Class Action Complaint, each of those securities offerings incorporated materially untrue information about the Company.
Ultimately, the Company’s misconduct began to come to light in late 2007, when in a series of disclosures Washington Mutual announced a shocking 72% decline in the Company’s earnings and the need to set aside more than $2 billion additional funds to cover expected loan losses. Upon the disclosure of this news and other revelations about Washington Mutual’s improper lending practices, the Company’s stock price and the value of the securities made pursuant to the Company’s offerings plummeted, and Washington Mutual’s investors suffered billions of dollars of losses.
On May 7, 2008, the Honorable Marsha J. Pechman of the United States District Court for the Western District of Washington appointed Ontario Teachers’ Pension Plan board (“Ontario Teachers”) Lead Plaintiff and BLB&G Lead Counsel for the Class.
On August 5, 2008, BLB&G filed on behalf of Ontario Teachers and other investors a class action complaint detailing allegations of fraud in Washington Mutual’s home loan business. The complaint includes a discussion of just under ninety (90) statements from former Washington Mutual insiders and others obtained in the course of BLB&G’s investigation, as well as previously undisclosed Washington Mutual documents, and expert analysis all supporting the allegations of wrongdoing in the complaint, including the misconduct of the Underwriters and Deloitte. On May 15, 2009, Judge Pechman sustained certain of the claims in the complaint while asking plaintiffs to replead the remaining claims. On June 15, 2009, BLB&G filed an Amended Consolidated Class Action Complaint incorporating additional evidence obtained in the wake of WaMu’s bankruptcy.
BLB&G continues to investigate the misconduct at Washington Mutual, including the activities of the Underwriters and Deloitte. If you wish to discuss the investigation, please contact us at: 212-554-1400.”
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