The American Lawyer - July/August 2010

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In re Countrywide Securities Litigation

Countrywide Financial Corporation, once the nation’s largest mortgage lender, agreed on May 7 to pay $600 million to settle class action allegations that it misled investors about its risky lending practices. Countrywide’s former auditor, KPMG LLP, will pay an additional $24 million. The sum appears to be the largest securities class action settlement related to the subprime-mortgage crisis.

Under the settlement, Countrywide does not admit to any
wrongdoing.

The case was filed on behalf of Countrywide shareholders in August 2007 in federal district court in Los Angeles and later consolidated with four other suits. Labaton Sucharow’s Joel Bernstein was appointed lead counsel; Countrywide looked to Goodwin Procter’s Brian Pastuszenski; and KPMG turned to Bingham McCutchen’s Todd Gordinier and Gwyn Quillen.

According to the complaint, Countrywide misled investors by making misstatements about its loan portfolio. Investors allege that the bank stated that it underwrote mainly low-risk loans, while actually it relied heavily on risky subprime mortgages. Those lending practices, investors allege, fueled the company’s subsequent stock plunge in the subprime market collapse.

Negotiations between the three parties began about a year ago, and a settlement was finally hammered out at the beginning of April, following intensive mediation. Boston University School of Law professor Eric Green and Los Angeles federal district court judge A. Howard Matz served as the mediators.

At press time Los Angeles federal district court judge Mariana Pfaelzer had not yet approved the settlement. Countrywide’s former CEO Angelo Mozilo and two other former executives are facing a Securities and Exchange Commission fraud suit alleging that they misled investors and violated insider trading rules. Lawyers for the executives have called the allegations “baseless.”

FOR DEFENDANT COUNTRYWIDE FINANCIAL CORPORATION (CALABASAS, CALIFORNIA)

Goodwin Procter: John Farley, Inez Friedman-Boyce, Stuart Glass, Brian Pastuszenski, Alexis Shapiro, Jeffrey Simes, and Lloyd Winawer. (Simes is in New York; Winawer is in Menlo Park, California; and the rest are in Boston.) Countrywide has tapped Goodwin for various litigation matters.

FOR DEFENDANT KPMG LLP (MONTVALE, NEW JERSEY)

Bingham McCutchen: Dale Barnes, Jr., Todd Gordinier, Edward Kim, Gwyn Quillen, J. Warren Rissier, and counsel Amy June. (Barnes is in San Francisco; Gordinier is in Los Angeles and Costa Mesa, California; Kim is in Costa Mesa; Quillen is in Santa Monica; Rissier is in Los Angeles; and June is in Palo Alto.) The firm has represented KPMG in previous matters.

—Irene Plagianos

U.S. v. RBS

FOR PLAIN TIFF NEW YORK STATE COMMON RETIREMENT FUND ET AL.

In-House: At the New York City Law
Department: corporation counsel
Michael Cardozo.
Labaton Sucharow: Joel
Bernstein, David Goldsmith,
Jonathan Plasse, Ira Schochet,
and associates John Bockwoldt,
Joshua Crowell, Michael
Markunas, Craig Martin, and
Michael Rogers. (All are in New
York.) Labaton was tapped by the
pension funds in a beauty contest.

On May 10 the Royal Bank of Scotland Group plc agreed
to forfeit $500 million to the
United States to end a U.S.
Department of Justice investi-
gation into violations of trade
with sanctioned countries and
other offenses. The violations
involved ABN AMRO Bank
N.V., a bank RBS acquired in
2007.