Investors win class-action status

Investors suing 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. Investors suing 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. Shareholders who lost money on stock purchased from October 2005 to July 2008 can proceed with claims under a single lawsuit, U.S. District Judge ruled Tuesday, according to court documents. The judge appointed a local-based law firm to lead the plaintiffs’ case. The lawsuit consolidates more than 20 cases filed against the bank 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. An attorney representing the defendants didn’t immediately return a voice-mail message seeking comment. The named plaintiffs in the case include a pension plan in Canada, and four other pension groups, according to court documents.
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 argued 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. The bank filed for bankruptcy the day after its banking unit was taken over by regulators and sold for $1.9 billion. Before it failed, the bank had more than 2,200 branches and $188 billion in deposits. The judge ruled that a separate federal shareholder lawsuit claiming the bank misled purchasers of $10.8 billion in mortgage-backed securities could proceed. Separately, the bank said the Internal Revenue Service has paid it $4.77 billion of an expected tax refund of up to $5.8 billion. A proposed agreement on dividing that money between the banks and the FDIC requires approval by various parties to the bankruptcy case. If you have been a victim of fraud or misrepresentation in commerical transactions or foreclosure scams contact me at my Rockville or Baltimore offices for a free intial conversation at 1-800-320-0080.

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