Institutional Investors Are Filing Big Claims Against Financial Services Firms


Defense-minded institutions that have long remained on the sidelines when defrauded have finally woken up and are jumping on the plaintiff-recovery bandwagon as they seek to protect themselves against a variety of wrongdoing, according to Vanessa O’Connell’s Wall Street Journal article entitled “Company Lawyers Sniff Out Revenue.” These actions include waves of claims against Wall Street financial institutions for fraud in the sale of mortgage backed securities, CDOs and related exotic investments.

Some recent examples include the following:

? Earlier this month, a federal appellate court denied Credit Suisse’s attempt to overturn a $431 million arbitration award in favor of STMicroelectronics NV in a case involving auction rate securities.

? The Los Angeles County Employees Retirement Association recently sued Bank of New York Mellon Corp. for allegedly overcharging the fund for foreign exchange transactions.

? A Virginia bankruptcy court is considering a proposed $14.3 million settlement to be paid by SunTrust Banks Inc. over its sale of auction rate securities to LandAmerica 1031 Exchange Service Inc.

? Mass Mutual recently filed suit against Goldman Sachs, UBS and Bear Stearns (now part of JP Morgan) for selling it more than $175 million of mortgage-backed securities without disclosing that they were composed of troubled loans, which made them worth only $40 million.

? A group of pension funds recently sued JP Morgan Chase to recover nearly $500 million that JP Morgan invested on the funds’ behalf in notes issued by a troubled Structured Investment Vehicle (SIV) called Sigma. The crux of the allegations is that JPMorgan, knowing Sigma was in trouble, did not tell the funds what it knew about Sigma’s problems, or take any steps to protect their interests.

? DeutscheBank recently lost an interest rate swap case filed by a German bathroom supplier. Deutsche Bank was ordered to repay the client the equivalent of US$769,000.

? The National Credit Union Association, on behalf of five of its members, is suing Goldman Sachs, Merrill Lynch, Citigroup and JPMorgan Chase to recover $50 billion used to purchase risky subprime mortgage loans.

On other fronts, DuPont recovered nearly $3.6 million during the first quarter of 2011. That followed a $454.7 million recovery last year from 198 separate actions.
Ford reportedly has expanded its “Affirmative Recovery” program. Ford generated enough revenue from plaintiff recoveries in one recent quarter to offset all of its legal cots according to the article.

Tyco launched an “Asset Recovery” program. “We hope to help the company’s bottom line,” Judith A. Reinsdorf, Tyco’s general counsel, was quoted as saying.
Michelin is also setting up a program to identify and pursue a broader range of claims, according to the article.

Such lawsuits or threats of lawsuits “can produce hundreds of millions of dollars in added revenue for a company in a single year, potentially turning its legal department into a profit maker,” according to the article.

“It adds up to real money over time,” Tom Sager, DuPont general counsel, was quoted as saying.

J. Boyd Page, the senior partner of Page Perry, an Atlanta-based law firm, said: “We are seeing a marked increase in the number of institutional plaintiff-recovery actions both here in the U.S. and all over the world. While some institutional investors are financially sophisticated, they realize that they cannot bring their sophistication to bear when material facts are misrepresented or omitted in a way that makes what was disclosed misleading.”

Page Perry has over 125 years collective experience representing institutional and individual investors in securities-related litigation and arbitration all over the country. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions.