|  | | 2009 News and Press Releases | | |
SETTLEMENT NEWS:
MGIC Hit With $500M Securities Class Action
Pete Brush
Securities Law 360. June 23, 2009
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EXCERPT: A consolidated group of plaintiffs has accused mortgage insurance giant MGIC Investment Corp. and company principals of misleading the public about the company's health ahead of a mortgage meltdown-related stock crash that cost investors more than half a billion dollars. The 130-page amended lawsuit, filed Monday in the U.S. District Court for the Eastern District of Wisconsin, brings together five groups of plaintiffs per the March order of Judge Lynn Adelman. The complaint, filed on behalf of investors who bought MGIC common stock between Oct. 12, 2006, and Feb. 12, 2008, involves "two separate but related sets of false and misleading statements." Specifically, the lawsuit claims MGIC and company officers mislead investors about the company's escalating losses that were tied to mispriced insurance on a deteriorating portfolio of mortgage loans. And it said false statements also were made about the ability of MGIC affiliate Credit-Based Asset Servicing and Securitization LLC — a mortgage investment and servicing company — to withstand the subprime mortgage crisis because of its purportedly superior underwriting. The problems at the affiliate were masked in part, according to the lawsuit, so that MGIC could get a good price when it sold off a large portion of that company's stock as part of a merger plan with a third party, Radian Group Inc. As a result, according to the lawsuit, MGIC stock traded at artificially inflated prices during the class period, reaching a high of $60.05 per share on the New York Stock Exchange in October 2006 and declining to $12.61 per share by mid-February 2008. When the truth about the enormous losses embedded in the recent vintage years of MGIC’s insurance business was revealed, MGIC’s stock plummeted, causing losses to plaintiff and others in the class of more than half a billion dollars," the lawsuit said. |
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