Reuters: NY Pension Funds to Lead Countrywide Plaintiffs
Fri Nov 30, 2007 6:01pm EST
By Jonathan Stempel
NEW YORK (Reuters) - A federal judge has named two New York pension funds as lead plaintiffs for five class-action lawsuits accusing Countrywide Financial Corp (CFC.N: Quote, Profile, Research), the largest U.S. mortgage lender, of inflating earnings and overstating its ability to weather the housing slump.
U.S. District Judge Mariana Pfaelzer in Los Angeles on Wednesday appointed New York State Comptroller Thomas DiNapoli, who oversees the New York State Common Retirement Fund, and the New York City Pension Funds as co-lead plaintiffs for the investor lawsuits.
The plaintiffs accused Countrywide of misleading investors about its lending practices, saying it could easily weather the housing downturn, and artificially boosting income by understating loan loss reserves.
They said these actions inflated the Calabasas, California-based company's share price, and that investors lost money once the truth was revealed and the shares tumbled.
"Public corporations need to be held to the highest standards when it comes to transparency and disclosure of risks to their businesses," DiNapoli said. "The unlawful actions and omissions by Countrywide deprived investors of the information needed to make prudent decisions."
New York's pension fund had about $154.5 billion of assets as of March 31, while New York City Comptroller William Thompson said the city funds have more than $110 billion. Law firm Labaton Sucharow LLP is representing the funds.
Countrywide shares have fallen 75 percent this year, wiping out about $19 billion of market value.
That drop is even after the stock soared $1.52, or 16.3 percent, to $10.82 on Friday, amid optimism that the U.S. Treasury Department and the mortgage industry would work out a plan to keep higher-risk subprime borrowers, who might otherwise face higher rates and foreclosures, in their homes.
Judge Pfaelzer found that the New York pension funds, with a combined loss of "over $100 million," had the largest stake of any prospective lead plaintiff. She also said the funds had considerable experience in similar cases, and accepted their pledge to vigorously protect all plaintiffs' interests.
Countrywide has faced heavy criticism from New York Sen. Charles Schumer and others for putting borrowers into home loans they could not afford in the pursuit of profit.
Mounting defaults contributed to a $1.2 billion third-quarter loss. Chief Executive Angelo Mozilo in July said U.S. housing faced its worst slump since the Great Depression.
Defendants in the lawsuits also include Mozilo, Chief Operating Officer David Sambol and his predecessor Stanford Kurland, Chief Financial Officer Eric Sieracki, and others.
(Additional reporting by John Poirier and Patrick Rucker in Washington, D.C.; Editing by Andre Grenon and Braden Reddall)
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