New York Funds Take Lead in Countrywide Lawsuits
A federal judge has named two New York pension funds lead plaintiffs for five class-action lawsuits accusing Countrywide Financial, the largest US mortgage lender, of inflating earnings and overstating its ability to weather the housing slump.
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, court records show.
She found that the pension funds, with a combined loss of "over $100 million," had the largest stake of any prospective lead plaintiff. The judge also said the funds had considerable experience in similar cases and accepted their statement that they planned to vigorously protect all plaintiffs' interests.
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.
The plaintiffs accuse Calabasas, Calif.-based Countrywide of misleading investors about its lending practices, overstating its ability to weather the nation's housing downturn, and inflating income by understating loan loss reserves, according to Thompson and court records.
Countrywide shares through Thursday had fallen 78 percent this year, wiping out more than $19 billion of market value.
Its shares soared as much as 29 percent Friday on optimism the 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.
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 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.