Bank of America Corp. and its Countrywide Home Loans unit were accused of racketeering in a lawsuit filed by two Indiana residents claiming that perjured affidavits were used to foreclose on their home.
Dwayne Ransom Davis and Melisa Davis filed the complaint yesterday in federal court in Indianapolis. Their lawyer, Irwin Levin, confirmed the filing in a phone interview. The filing couldn’t be independently verified.
“The defendants and their cohorts engaged in a pattern of racketeering activity in which they routinely and repeatedly prepared perjured affidavits in order to rapidly churn foreclosures,” the couple said in the complaint.
Bank of America, the largest U.S. lender, resumed foreclosures on Oct. 18, after a 10-day nationwide pause to review more than 100,000 cases.
“Our assessment shows underlying information provided as the basis for our past foreclosure decisions is accurate,” Rick Simon, a spokesman for the Charlotte, North Carolina-based bank, said in an e-mailed statement earlier yesterday.
Simon was responding then to an announcement by Tom Dart, sheriff of Cook County, Illinois, which includes Chicago, that he will halt foreclosure evictions starting Oct. 25 unless Bank of America and two other lenders provide him with assurances that the proceedings are being lawfully pursued.
“To my knowledge, we have not seen this suit and cannot comment on it,” Simon said of the Davis case in a later phone interview yesterday.
The case is Davis v. Countrywide Home Loans Inc., 10-cv- 01303, U.S. District Court, Southern District of Indiana (Indianapolis).
FDIC Sued by Bank of America Over Taylor Bean Mortgage Losses
The Federal Insurance Deposit Corp. was sued by Bank of America Corp. over $1.75 billion in investor losses stemming from an alleged fraud by failed lender Taylor Bean & Whitaker Mortgage Corp.
The FDIC has denied claims by Bank of America against Colonial Bank and another financial institution in receivership that bought fake mortgages from a Taylor Bean unit, Ocala Funding LLC, according to a complaint filed Oct. 1 in federal court in Washington. Bank of America was the trustee for notes issued by Ocala Funding, according to the complaint.
Ocala financed Taylor Bean’s mortgages, issued debt and used the proceeds to buy the mortgages, Bank of America said in the complaint. Ocala then sold the notes to pay off the debt or buy additional mortgages, according to the compliant.
From 2000 to 2009, Taylor Bean and Colonial Bank schemed to steal from Taylor Bean’s borrowing facilities to hide liquidity problems, Bank of America said in its complaint. Taylor Bean’s former chairman was accused by the U.S. in June of helping run a more than $1.9 billion fraud scheme to deceive financial firms and the government’s Troubled Asset Relief Program by covering up shortfalls, the Justice Department said in a statement in June.
The scheme contributed to the failures of Colonial Bank, which had been one of the 50 largest U.S. banks, and Taylor Bean, once one of the largest closely held mortgage companies in the U.S., the agency said.
David Barr, an FDIC spokesman, didn’t return a voice-mail message seeking comment after regular business hours yesterday.
The case is Bank of America v. FDIC, 10-01681, U.S. District Court, District of Columbia (Washington).
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Foreclosure Fortune Buys Bugatti, Yacht, Mansions for Attorney
For Americans, the foreclosure crisis has wiped out fortunes, bringing destitution and homelessness. For Florida attorney David J. Stern, it has brought mansions, a Bugatti sports car and a luxury yacht, Bloomberg News’s David McLaughlin reports.
Florida has the third-highest residential foreclosure rate in the U.S., and Stern, 50, has made a fortune off the bust. His foreclosure-processing business has generated hundreds of millions of dollars in revenue preparing documents for the cases that his law firm brings on behalf of lenders seeking to reclaim homes from borrowers who can’t pay their mortgages.
Now his business is under scrutiny, as banks suspend foreclosures and evictions amid allegations that some home seizures were based on fraudulent documents. Attorneys general in every U.S. state have joined to probe foreclosure practices generally. Stern’s foreclosure firm and three others are under investigation by Florida Attorney General Bill McCollum.
“Some of these law firms we’re dealing with, we have reason to believe, actually forged documents, committed fraud, did all kinds of things,” McCollum said in an interview Oct. 15. “We don’t know where this is headed right now.”
Stern’s attorney, Jeffrey Tew, said Stern has used technology and a well-organized operation to efficiently process foreclosures. Stern gets a flat fee of about $1,400 a foreclosure, according to Tew, of Tew Cardenas LLP in Miami.
“David’s wealth is a reflection of his acumen and the tremendous volume of foreclosures,” Tew said in an interview Oct. 18.
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Lehman Bankruptcy Advisers’ Fees Top $1 Billion
Lehman Brothers Holdings Inc. paid its lawyers and managers $51.8 million in September, putting total advisers’ fees over the billion-dollar mark after 24 1/2 months in bankruptcy court, according to a court filing.
Restructuring firm Alvarez & Marsal LLC, which runs the defunct investment bank through its co-founder, Bryan Marsal, led recipients with $356.4 million in fees for “interim management,” according to an Oct. 18 filing in U.S. Bankruptcy Court in Manhattan. Weil Gotshal & Manges LLP of New York has collected $237 million for acting as the lead bankruptcy-law firm.
Lehman, which pays advisers at the rate of $1.3 million every day of the year, calculated last month that its creditors may eventually recover an average of 15.8 cents on the dollar. The advisers haven’t faced major challenges from the bankruptcy judge or trustee who monitor such payments.
Lehman, once the world’s fourth-biggest investment bank, filed the biggest bankruptcy in U.S. history in September 2008 with assets of $639 billion. Creditors include Goldman Sachs Group Inc., UBS AG, the New York Giants professional football team and Abu Dhabi Investment Authority as well as individuals who hold Lehman bonds.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Madoff Judge Defers Ruling on Feeder Clients’ Claims
The judge overseeing the liquidation of Bernard L. Madoff’s investment firm deferred a ruling on whether investors who lost money in so-called feeder funds will receive payments from the bankruptcy court trustee.
U.S. Bankruptcy Judge Burton Lifland in New York yesterday said he will rule later on the request by trustee Irving Picard to deny the claims of investors who weren’t direct customers of Bernard L. Madoff Investment Securities LLC, the firm at the center of the world’s largest Ponzi scheme.
“It really comes down to a narrow issue: who’s a customer and who’s entitled to the benefits?” Lifland said after hearing arguments from both sides in court yesterday. “The statute is largely formulaic.”
Picard said in December the feeder-fund claims were rejected because they weren’t from direct Madoff accounts. The trustee filed a motion in June to obtain the judge’s approval of that action and to allow objectors to be heard.
Investors in 19 accounts with 16 feeder funds were denied reimbursement of their claims, the trustee said in the motion. The feeder funds included Fairfield Greenwich Group, J. Ezra Merkin’s Gabriel Capital Corp. and Kingate Global Fund.
The feeder funds themselves, not the individual claimants, are the “customers” of Madoff, David Sheehan, the lawyer for the trustee, said in the motion. Investors in feeder funds filed about 1,700 objections, Sheehan said yesterday.
Madoff, 72, pleaded guilty in March 2009 and is serving a 150-year prison sentence.
The case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Intel Computer Users Object to Class-Action Denial
Intel Corp. faces objections to a court official’s recommendation that computer users be denied group status in their lawsuit accusing the world’s biggest chipmaker of antitrust violations.
Special Master Vincent J. Poppiti wrote in a July 28 report to U.S. District Judge Leonard P. Stark in Wilmington, Delaware, that purchasers of computers with Intel microprocessors “have not established that they will be able to demonstrate an antitrust violation through common proof.”
In response to Poppiti’s recommendation, J. Clayton Athey, a plaintiffs’ lawyer seeking class-action status for the case, said Oct. 15 in court papers that “the alternative to class certification is millions of individual actions.”
He wrote that the plaintiffs “have also set forth common evidence” that “as a result of its anticompetitive conduct, Intel overcharges for its microprocessors resulting in inflated PC prices to consumers.”
The computer purchasers’ case was a companion lawsuit to Advanced Micro Devices Inc.’s 2005 complaint alleging antitrust violations by rival Intel.
Intel agreed last November to pay Advanced Micro $1.5 billion to settle that case, which claimed Intel controlled the microprocessor market by providing discounts to customers to avoid AMD products.
“We believe the special master was correct to start off with,” an Intel spokesman, Chuck Mulloy, said in a phone interview.
The lead case is Paul v. Intel Corp., 05-cv-485, U.S. District Court, District of Delaware (Wilmington).
Bank of America, JPMorgan Chicago Evictions on Hold
Foreclosure evictions by Bank of America Corp., JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC will be suspended next week in Cook County, Illinois, which includes Chicago, Sheriff Tom Dart announced.
Dart said yesterday he is halting evictions until he receives assurances that they are legal. His decision, effective Oct. 25, affects about 1,500 pending cases, he said.
“I need them to tell me that everything was done properly,” Dart said at a press conference, referring to the lenders. He is demanding affidavits to support the banks’ cases, he said.
It’s the second time since 2008 that Dart has halted Cook County foreclosure evictions over concerns about lender practices and procedures. The three affected by yesterday’s announcement have announced reviews of their paperwork.
Bank of America said Oct. 18 it will start resubmitting foreclosure affidavits next week in 102,000 cases. It said Oct. 8 it would stop foreclosure sales nationally pending the review.
Dart said his office has reviewed 350 foreclosure cases and only 17 had complete paperwork to justify an eviction.
Bank of America Loses Bid to Appeal Unlawful Dismissal Lawsuit
Bank of America Corp. lost a bid to appeal a Hong Kong court’s order that a former trader’s lawsuit, claiming she was fired so the bank wouldn’t have to pay a bonus, should go to trial.
Hong Kong Court of Appeal Judge Maria Yuen yesterday rejected the bank’s argument that its former employee Sunny Tadjudin should have sued under a different law.
Tadjudin, who is seeking at least HK$10.9 million ($1.4 million) in damages, also won in June when the same court overturned an earlier dismissal of her claim. Bank of America’s Hong Kong-based spokesman Mark Tsang then said the bank was confident the claim will be held to be without merit.
Tsang declined to say yesterday whether the bank will appeal further.
Tadjudin, who worked for the bank’s distressed debt trading group from June 2000 to August 2007, claims her former manager had made false accusations against her in order to fire her and earn a higher bonus himself. She declined to comment on her case or yesterday’s ruling.
The case is Tadjudin Sunny and Bank of America NA, CACV173/2009, Hong Kong Court of Appeal.
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Hands Testifies He Wouldn’t Have Bid on EMI Deal
Guy Hands, the founder of Terra Firma Capital Partners Ltd., testified in his $8.3 billion fraud suit against Citigroup Inc. that his firm wouldn’t have bid on EMI Group Ltd. if he had known there were no other bidders.
Hands, 51, claims that Citigroup’s David Wormsley tricked him into overpaying for EMI, a 113-year-old music company, in a 2007 auction. Hands testified yesterday on the second day of a trial in U.S. District Court in Manhattan.
Hands claims Wormsley lied to him in a series of phone conversations over the weekend leading up to the Monday, May 21, 2007, auction for EMI, falsely telling him that Cerberus Capital Management LP planned to submit a competing bid.
“If he hadn’t made those statements, we wouldn’t have been bidding that Monday morning at all,” Hands told jurors, under questioning by his lawyer, David Boies.
Hands told jurors that several rival bidders dropped out in the days before the May 21, 9 a.m. deadline for bids, including Fortress Investment Group LLC, Warner Music Group Corp. and JPMorgan Chase & Co.’s One Equity Partners.
Hands said that on the final weekend before the auction, Wormsley, whom he described as his friend and business associate, told him that Cerberus remained in the auction and was bidding 2.62 pounds per share. Hands told jurors about a telephone conversation he said he had with Wormsley from the study of his home, at midnight, nine hours before the bids were due.
“He told me that Cerberus were there at 262, that the bid had to be in at 9 a.m. the next morning and he told me not to play any games with the price,” Hands testified.
If he had known the process had turned into a “busted auction,” with his firm the only bidder, Terra Firma would have withdrawn from the bidding and negotiated with the sellers directly for a lower price, Hands told jurors.
The morning after his midnight phone call with Wormsley, Hands said, he spoke to Tim Pryce, Terra Firma’s chief executive officer who was, at the time, the firm’s general counsel. Hands said he told Pryce to go forward with Terra Firma’s bid of 2.65 pounds a share.
The case is Terra Firma v. Citigroup, 09-cv-10459, U.S. District Court, Southern District of New York (Manhattan).
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Ex-Bawag CEO Elsner Should Be Given New Trial, Prosecutor Says
Austrian prosecutors recommended that former Bawag PSK Bank Chief Executive Officer Helmut Elsner should be given a new trial on charges that he misused funds and caused 1.7 billion euros ($2.4 billion) in losses at the bank.
The findings of the court in 2008 weren’t sufficient for a guilty conviction of Elsner, prosecutor Erich Weiss said in arguments filed to Austria’s supreme court on Oct. 15, his spokesman, Wilfried Seidl said in a telephone interview yesterday.
Elsner, 75, and his fund manager Wolfgang Flottl, 55, were the most prominent among nine men convicted in 2008 of charges including improper use of funds, fraud and false accounting. The losses were discovered in 2006 after U.S. futures broker Refco Inc. collapsed into bankruptcy.
“We recommend nullifying the verdicts and sending them back to the first court” for a retrial, Weiss said. “The findings were not sufficient for a guilty verdict” on several counts for Elsner and all counts for Flottl, Seidl said.
Austria’s supreme court has scheduled two days starting Dec. 22 to discuss the case, court spokesman Ronald Rohrer said. The court isn’t bound by the prosecutors’ recommendation.
Elsner’s lawyer, Wolfgang Schubert, wasn’t available for a comment.
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Pfizer Wins Arkansas Woman’s Lawsuit Over Prempro
Pfizer Inc. properly warned an Arkansas woman about the cancer risks of its Prempro menopause drug, jurors found in rejecting her bid for at least $3.5 million in damages.
Jurors in federal court in Little Rock, Arkansas, deliberated less than an hour before siding with Pfizer, the world’s largest drugmaker. Margaret Wilson, a 68-year-old former bank teller, claimed that Prempro helped caused her breast cancer and executives of Pfizer’s Wyeth unit hid the medicine’s health risks from women and their doctors.
Wyeth now has won six of the 13 Prempro cases decided by juries since trials began in 2006. Wyeth got some verdicts against it thrown out at the post-trial stage or had awards reduced. Wyeth also has won dismissals of more than 3,000 cases before trial, the company said in a statement.
The jury’s decision “affirms that Wyeth communicated the risks and benefits of Prempro,” Chris Loder, a Pfizer spokesman, said in the statement.
The case is Wilson v. Wyeth, MDL 03-cv-1507-WRW, U.S. District Court, Eastern District of Arkansas (Little Rock).
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Wridgways Wins Court Approval for Plan to Sell to Santa Fe
Wridgways Australia Ltd. won an Australian court’s approval for its plan to sell the company to Santa Fe EAC Moving and Relocation Services for A$89.6 million ($88.6 million), to be voted on by shareholders Nov. 25.
Santa Fe’s offer of A$2.80 a share is 10 percent less than the high end of a range of A$2.60 to A$3.11 that accounting firm BDO Australia concluded Wridgways was worth, Federal Court Judge Peter Jacobson said at a hearing in Sydney yesterday.
“The court doesn’t usurp the judgment of the shareholders,” said Jacobson, who had to decide whether the plan was fair. It will be up to the shareholders to decide whether the A$2.80 offer is adequate, he said.
Closely held Santa Fe, based in Hong Kong, offered on Sept. 20 to buy Wridgways, a 117-year-old Australian moving company with 30 offices and 470 employees, under a so-called scheme of arrangement. Under the plan, Santa Fe must win support from 75 percent of Wridgways shareholders and the judge must approve it.
Jacobson raised concern that parts of the plan protecting Santa Fe’s bid, including its right to match any competing offer and a lack of a provision giving a potential rival bidder time to respond to a matching offer, might be anti-competitive.
“It’s a disincentive to a competing bidder,” he said.
Wridgways must inform the shareholders of any superior offer that’s made, and a rival bidder will have time to respond to Santa Fe’s match because of a delay before shareholders get a chance to vote, Malcolm Oakes, a lawyer for the company, told the judge.
The case is Application by Wridgways Australia Ltd., NSD1227/2010, Federal Court of Australia (Sydney).
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To contact the editor responsible for this story: David E. Rovella at email@example.com.