Washington Mutual Inc. Case 11/05/2007
AUGUST 2011 - According to the Notice:
Overview of the Action and the Class: This Notice relates to three separate proposed Settlements of claims in a pending class action brought by investors alleging that the prices of WMI’s securities were artificially inflated during the Class Period as a result of false statements, non-disclosures, and fraudulent conduct in violation of the federal securities laws. A more detailed description of the Action is set forth in paragraphs 14 – 27 below. The “Settling Defendants” are: (a) Kerry K. Killinger, Thomas W. Casey, Stephen J. Rotella, Ronald J. Cathcart, David C. Schneider, John F. Woods, Melissa J. Ballenger, Anne V. Farrell, Stephen E. Frank, Thomas C. Leppert, Charles M. Lillis, Phillip D. Matthews, Regina Montoya, Michael K. Murphy, Margaret Osmer McQuade, Mary E. Pugh, William G. Reed, Jr., Orin C. Smith, James H. Stever and Willis B. Wood, Jr. (the “Individual Defendants”); (b) Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated (now known as Morgan Stanley & Co. LLC), Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., UBS Securities LLC, J.P. Morgan Securities Inc., Barclays Capital Inc., Keefe, Bruyette & Woods, Inc., Cabrera Capital Markets, LLC, The Williams Capital Group, L.P., Citigroup Global Markets, Inc., Greenwich Capital Markets, Inc. (now known as RBS Securities Inc.), BNY Mellon Capital Markets LLC (successor to BNY Capital Markets, Inc.), and Samuel A. Ramirez & Company, Inc. (the “Underwriter Defendants”); (c) Deloitte, and (d) WMI.2
The proposed Settlements each provide for the release of claims against the Settling Defendants in the respective Settlements and others as specified in (i) “Stipulation and Agreement of Settlement with Individual Officer and Director Defendants and with Washington Mutual, Inc.” dated June 30, 2011 (the “D&O/WMI Stipulation”); (ii) “Stipulation and Agreement of Settlement with the Underwriter Defendants” dated June 30, 2011 (the “Underwriters Stipulation”); and (iii) “Stipulation and Agreement of Settlement with Defendant Deloitte & Touche LLP” dated June 30, 2011 (the “Deloitte Stipulation”). All persons and entities who purchased or otherwise acquired WMI Class Securities during the Class Period and were damaged thereby, except for certain persons and entities
who are excluded from the Class by definition (see paragraph 28 below) or persons and entities who validly elect to exclude themselves from the Class (see paragraphs 82 - 84 below), will be affected by the Settlements, if they are approved by the Court, and may be eligible to receive a payment from some or all of the Settlements.
A federal judge ruled that fraud charges leveled against the former officers of Washington Mutual are not sufficient to go forward with the case.
Seattle U.S. District Judge Marsha Pechman said Friday that the allegations lack substance, calling the pleading "verbose and disordered." She ruled that the plaintiffs need to amend their complaint and do a better job of connecting the dots.
In May 2008, the court consolidated three class action lawsuits against WaMu and a 400-page consolidated complaint was filed in August 2008 containing information from 89 confidential witnesses.
The judge told the plaintiff attorneys, that "You know, 200 pages of it reads like a very nice detective novel, and it lays out juicy tidbits," and "The problem is is that I'm not looking for a detective novel, I'm looking for a board game. I'm looking for Professor Plum in the library with the wrench. And that's really what I need to have you lay out for me. Where in this complaint do I find the individual who made the statement and why it is that you think that they knew what they were doing when they did it?"
The judge threatened to take the lead lawyers off the case if they cannot address her concerns in an amended complaint.
Original Post - 12/01/2008
On October 21, 2008, the lead plaintiff filed a Consolidated Class Action Complaint adding additional defendants as well as additional claims pursuant to the Securities Act.
According to the Transfer Order from the U.S. Judicial Panel on Multidistrict Litigation, dated February 21, 2008, several potentially related actions pending outside the Western District of Washington have been transferred to the Western District of Washington for coordinated or pretrial proceedings before the Honorable Marsha J. Pechman. On May 7, 2008, the Court entered the Order consolidating several cases into lead case 08-CV-0387, In Re Washington Mutual, Inc. Securities Litigation. The case is also being managed in multidistrict litigation In Re Washington Mutual, Inc., Securities, Derivative & "ERISA" Litigation, case number MDL 1919. The Court appointed Ontario Teachers' Pension Plan Board as lead plaintiff and appointed Bernstein Litowitz Berger & Grossman LLP and Byrnes & Keller LLP as lead counsel and liaison counsel, respectively. On September 30, 2008, defendant Washington Mutual Inc. filed a notice of bankruptcy.
Several, similar purported class action complaints been filed in the U.S. District Court for the Southern District of New York and the U.S. District Court for the Western District of Washington. Specifically the complaint charges WaMu and certain of its officers and directors with violations of the Securities Exchange Act of 1934. WaMu is a financial services company and the largest savings and loan bank in the United States. The Company was founded in 1889 and provides financial products and services to consumers and small to mid-sized businesses. The Company offers consumer banking, mortgage lending, commercial banking, and consumer finance throughout the United States.
The complaint alleges that, during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. WaMu’s loan portfolio contained more than $57 billion in adjustable-rate mortgages or Option-ARM loans. The complaint further alleges that the Company failed to disclose: (i) that it had far greater exposure to anticipated losses and defaults in its home loan portfolio, particularly with Option-ARMs, than it had previously disclosed; (ii) that defendants’ Class Period statements about the Company undertaking significant preparations and implementing defensive measures to weather the increasingly difficult credit and housing markets were patently false; (iii) that defendants had engaged in a conspiracy and scheme to inflate the appraisal value of homes with the intent to artificially increase the estimated loan-to-value ratio of its Option-ARM portfolio; and (iv) that due to the Company’s improper appraisal practices, the mortgages it had issued were much riskier than represented.
According to the complaint, on October 17, 2007, after the market closed, WaMu stunned investors by disclosing that it had suffered a 72% drop in third quarter of 2007 net income and would have to set aside up to $1.3 billion in the fourth quarter of 2007 to cover its loan losses. On this news, WaMu’s stock dropped from $33.07 per share to as low as $30 per share, closing at $30.52 per share on October 18, 2007 on volume of more than 36 million shares. Then, on November 1, 2007, News York’s Attorney General issued a press release announcing that a lawsuit was filed against First American Corporation and eAppraiseIT, alleging that they conspired with Washington Mutual to inflate Real Estate appraisals. Following this disclosure, WaMu’s stock dropped to as low as $23.59 per share before closing at $23.81 per share, on volume of 31 million shares.