Michigan AG Schuette Sues Countrywide Financial To Recover $65 Million in Taxpayer-Funded Investment Losses
LANSING – Attorney General Bill Schuette and Treasurer Andy Dillon today announced that the State of Michigan has taken legal action against Countrywide Financial Corporation, its underwriters, auditor and some of its former executives and directors to recover $65 million in taxpayer-funded state pension funds. Schuette filed the lawsuit in the U.S. District Court for the Central District of California, accusing the defendants of participating in a massive corporate fraud scheme that depleted State of Michigan pension funds by millions of dollars.
“Protecting the hard-earned dollars of Michigan taxpayers from fraud is one of my top priorities,” said Schuette.
In the complaint, the Attorney General’s office alleges Countrywide had effectively become a subprime lender while telling investors that it continued to maintain stringent mortgage loan underwriting standards that differentiated it from its competitors and subprime lenders. Throughout the March 12, 2004 through March 7, 2008 time period, Countrywide assured the market that it should not be affected by a downturn in the housing market. However, during that period, Countrywide’s stock price dropped about 90%, from over $35 per share to about $5 per share. This came as a result of disclosures revealing Countrywide’s lax mortgage underwriting guidelines, cascading mortgage defaults, and an increased use of “pay option” adjustable rate mortgages, no documentation mortgages and other risky loan types. This represented a loss of market capitalization of approximately $17 billion. The State of Michigan Retirement Systems lost over $65 million.
Countrywide’s stock was artificially inflated during the class period because defendants made these false and misleading statements, which concealed their fundamental shift in core mortgage-related business strategy. In addition, Countrywide also misstated their financial statements because reserves for loan losses, representation and warranty liability were materially understated.
“Nearly 540,000 participants and beneficiaries are depending on State Pension Funds to secure their retirement,” said State Treasurer Andy Dillon. “We take our obligation to protect those funds very seriously.”
The State of Michigan Retirement Systems (SMRS), which invests on behalf of Michigan Public School Employees, State Employees, State Police and Michigan Judges, hold combined assets of approximately $47.5 billion, making the SMRS one of the largest pension systems in the nation.
SOURCE: Michigan Attorney General
As soon as I get the complaint I will attach to this post…
Full complaint below…