Protecting What's Right

A New York judge has merged two derivative shareholder suits against Goldman Sachs executives regarding Abacus, the transaction that culminated in a $550 civil fraud settlement with the Securities and Exchange Commission (SEC) earlier this summer.  The SEC had accused the company of selling collateralized debt obligations without disclosing to investors that Goldman client Paulson & Co. had helped to choose and bet against the securities.

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In the largest settlement to date in shareholder suits involving the mortgage crisis, Countrywide Financial Corp. has agreed to pay $600 million to end several class action lawsuits.  The company’s accounting firm, KPMG, will also pay $24 million to settle claims.

The lawsuits alleged that Countrywide fraudulently concealed risks stemming from its loose mortgage-writing standards during the housing boom.

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Banking giant Citigroup Inc. has settled civil fraud charges with the Securities and Exchange Commission (SEC) for $75 million, marking the second settlement in weeks between the government agency and a Wall Street firm in cases concerning the mortgage meltdown.

The SEC charged Citigroup with misleading investors about its potential losses from high-risk, sub-prime mortgages.  Two Citibank executives also settled civil penalties with the SEC for their roles in misleading the SEC and the public about the firm’s liability exposure.

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Dell Inc., the third-largest computer maker in the world, is settling a civil fraud case with the Securities Exchange Commission (SEC) for $100 million.  The company’s chairman and CEO is separately paying $4 million to settle a civil penalty levied against him.

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Securities giant Goldman Sachs & Co. will pay $550 million to settle a civil fraud case brought by the Securities Exchange Commission (SEC), charging that the company misled investors of complex mortgage-related investments. The fine is the largest against a Wall Street firm in the SEC’s history.  $300 million will be paid to the federal government, with the remainder to be paid to two European banks that lost money as a result of the scandal.

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President Barack Obama has signed into law sweeping financial reforms that mark the first major overhaul of financial regulatory protections for consumers since the Great Depression.

The landmark legislation creates a consumer bureau to protect borrowers from lending abuses and gives the government broader authority to take over troubled financial firms.  It also establishes a council of federal regulators to monitor problems that might threaten the financial system.  Additionally, it provides for oversight of the derivatives market and provides shareholders with more control of corporations’ executive pay.

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Insurance giant American International Group Inc. (AIG) has settled, pending court approval, a multi-million dollar class action case involving wide-spread securities fraud. The lawsuit alleged anti-competitive market division, accounting violations, and stock price manipulation by AIG.

The lead plaintiffs in the class action lawsuit were the Ohio Public Employees Retirement System, State Teachers Retirement System of Ohio, and the Ohio Police and Fire Pension Fund.

For the full story, go to the Washington Post.

The U.S. Supreme Court has ruled against foreign investors attempting to apply U.S. securities law in a U.S.-filed suit.

The court voted 8-0 that foreign investors cannot sue foreign or American firms for fraud or misconduct regarding securities traded on foreign exchanges.  The case involved Australian investors who brought a securities fraud suit in U.S. federal court against National Australia Bank.  The investors claimed the right to bring suit under U.S. law because their fraud claims involve a Florida-based mortgage servicing company owned by the bank.

For the full story, go to the New York Times.

A class action has been filed against Boston-based LPL Financial, alleging that a Nebraska broker mislead investors about variable annuities sold by the company.

The annuities at issue combined a life insurance policy with mutual funds and securities investments.  The objectives of such variable annuities are to defer tax gains and provide a death benefit, and are generally for individuals with high net worth.

Read the AP story in the Lincoln Journal Star.