The original complaint charges W Holding and certain of its officers and directors with violations of the Exchange Act. W Holding operates as the holding company for Westernbank, a commercial bank operating in Puerto Rico that offers an array of business and consumer financial products and services including banking and trust and brokerage services.
The complaint alleges that, during the Class Period, defendants issued materially false and misleading statements that misrepresented and failed to disclose: (i) that the Company’s financial results during the Class Period were artificially inflated due to the Company’s failure to write-down the Inyx loans which were impaired. W Holding has now admitted that it is not likely to collect on the Inyx loans and that it will be toting a charge of at least $80 million; (ii) that the Company was improperly delayed the recognition of its impaired assets in order to inflate its reported income and asset quality; (iii) that the Company’s “regulatory capital” it claimed throughout the Class Period was similarly overstated; and (iv) that the Company’s “book value” per share was materially overstated; and as more fully described in the complaint, the Company’s published financial statements violated U.S. Generally Accepted Accounting Principles.
According to the complaint, on June 26, 2007, W Holding filed a Form 8-K with the SEC which reported that the Company had determined that “one of its larger asset-based loans” is impaired. In response to the Company’s announcement, the price of W Holdings stock dropped from $5.01 per share to $3.14 per share on extremely heavy trading volume and continued to decline, falling to $2.64 per share on June 29, 2007.
According to the Company’s FORM 10-K For the Fiscal Year Ended December 31, 2007, in September and October 2007, three separate complaints, entitled Hildenbrand v. W Holding Company, Inc., et al., C.A.No. 07-1886 FAB (D.P.R.), Webb v. W Holding Company, Inc., et al., C.A.No. 07-1915 FAB (D.P.R.), and Saavedra v. W Holding Company, Inc., et al., C.A.No. 07-1931 FAB (D.P.R), were filed in the United States District Court for the District of Puerto Rico as putative class actions against the Company and certain of its current or former officers and directors. Thereafter, all three cases were consolidated into the Hildenbrand action. Following the filing of motions mandated by statute, the federal court appointed Felix Rivera, Jose A. Nicolao, Fundacion Rios Pasarell, Inc. and Efren E. Moreno as lead plaintiffs. Pursuant to an agreed scheduling order, the lead plaintiffs’ Consolidated Amended Complaint was filed on April 28, 2008. Their complaint alleges that certain of the Company’s current or former officers and directors engaged the Company in a fraudulent lending scheme and issued misleading information to the market, principally in connection with the timing and reporting of impairments to loans to Inyx that are described below. Plaintiffs allege that these actions artificially inflated the trading prices of the Company’s securities. The plaintiffs brought the action on behalf of all those who purchased the Company’s securities during the period between April 24, 2006 and June 26, 2007, claiming violation of Section 10(b) of the Exchange Act (and Rule 10b-5 promulgated thereunder) by the Company and the individual defendants and violation of Section 20(a) of the Exchange Act by the individual defendants. Plaintiffs are seeking unspecified damages for their alleged economic losses from investing in the Company’s securities. The Company and individual defendants filed motions to dismiss, arguing that the Consolidated Amended Complaint lacked particularized factual allegations required to state claims for securities fraud under Sections 10(b) and 20(a) of the Exchange Act. Briefing on the motions was completed on September 10, 2008.
On March 24, 2009, Judge Jay A. Garcia-Gregory signed the Order denying the motions to dismiss the Consolidated Amended Complaint. On April 7, 2009, the defendants filed a motion for reconsideration of that Order. On July 28, 2009, that motion was denied.
On December 6, 2010, a motion to dismiss for failure to exhaust mandatory administrative claims process was filed. The motion was later denied on June 10, 2011.
On February 13, 2013, the parties entered into a Settlement Agreement. The Settlement was preliminarily approved on March 1.
On February 22, 2013, the Court issued an Order dismissing claims against a certain defendant for lack of subject matter jurisdiction.
On June 10, 2013, the Court issued an Order awarding attorneys' fees and expenses. This was followed by an Order Approving Plan of Distribution of Settlement Proceeds. Finally, the Court issued an Order approving the Settlement and dismissing this case with prejudice.