|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
Lawsuits over losses in U.S. mortgage market could hit a wall
Jonathan D. Glater
International Herald Tribune. May 8, 2008
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EXCERPT: Finding someone to sue over losses in the U.S. mortgage market and the credit crisis is easy. Winning in court, lawyers say, will be hard. Shareholders in big financial firms have accused UBS, Merrill Lynch, MBIA and Morgan Stanley, among others, of trying to hide their home loan problems, which later led to declines in their stock prices. Institutional investors have sued investment firms, including UBS, saying that they were misled into buying risky securities that later fell sharply in value. And there are more possible defendants, like the rating agencies that were supposed to evaluate these mortgage securities and the accounting firms that audited these companies. "The wave of litigation that we've seen, and certainly the current momentum, is going to eclipse what we saw out of the savings and loan crisis" of the early 1990s, said Jeff Nielsen, managing director at Navigant Consulting. "Some of those cases are still ongoing." A recent study by Navigant found that 170 lawsuits - 44 of which were securities suits - had been filed because of subprime mortgage losses in the first three months of this year, up from 89 in the last quarter of 2007. The legal landscape, however, has changed since the class-action bonanza that followed corporate fraud at Enron, WorldCom and Tyco. Recent U.S. Supreme Court opinions have raised the bar for aggrieved shareholders, requiring them to provide more detailed evidence of wrongdoing when they sue, before the discovery phase, when lawyers have a chance to gather information. Institutional investors face a different set of burdens. They must show that wrongdoing by the seller, not just a decline in the market, caused their losses. Given the speed and breadth of the decline in the U.S. real estate market, that may be hard. The institutions will also try to contend that they were fooled - a tricky argument for a large and prolific investor. |
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