DiNapoli, Thompson: State and City Pension Funds File Amended Complaint Against Countrywide
Filing Says Defendants Manipulated Definitions of “Subprime”
and “Prime” to Mislead Investors
New York State Comptroller Thomas P. DiNapoli, New York City Comptroller William C. Thompson, Jr. and the New York City Pension Funds today announced that they have filed a consolidated amended complaint on behalf of plaintiffs in the class action lawsuit against Countrywide Financial Corp. and other defendants.
Following an in-depth investigation by plaintiffs’ counsel, the amended complaint includes expanded allegations that, among other things, Countrywide covertly distorted industry definitions of prime and subprime borrowers and mortgages to mislead uninformed investors about the nature of the company’s mortgage business. The suit also contends that top Countrywide executives wrongfully engaged in insider trading, selling shares while simultaneously encouraging other investors to hold and buy shares of the company.
“Countrywide kept investors in the dark and improperly expanded the credit categories of borrowers in a manner that increased risk without disclosing this practice to investors,” DiNapoli said. “Countrywide’s greed and malfeasance exacted a cost on investors, and on our broader national economy and these defendants must be held accountable for their misdeeds. We are acting on behalf of the more than one million members, retirees and beneficiaries of the pension fund, who deserve fair compensation for their losses.”
“Countrywide executives were intent on engaging in risky and fraudulent behavior in an effort to strengthen their foothold in the residential mortgage market,” Thompson said. “As a result of their actions, Countrywide investors – such as the New York City and State pension systems – were significantly and continuously affected. Clearly, Countrywide’s statements to investors diverged wildly from its actual lending practice. It was reckless behavior that has severely impacted the lives of so many investors across this country.”
Countrywide Financial Corp., based in Calabasas, California, is one of the nation’s largest home mortgage lenders. The class action alleges that Countrywide’s material misstatements and omissions regarding its lending practices, and other aspects of its business and finances, artificially inflated the price of the company’s securities. When the truth was revealed, stock and bond prices plummeted and investors lost money. The class action also alleges that Countrywide issued stock and bonds based on SEC filings that contained false information.
DiNapoli and Thompson believe that the New York State Common Retirement Fund and the New York City Pension Funds lost millions of dollars as a result of misleading statements and factual misrepresentations by Countrywide. On November 28, 2007, United States District Judge Mariana R. Pfaelzer of the United States District Court for the Central District of California named DiNapoli and the New York City Pension Funds as co-lead plaintiffs in the class action suit.
Labaton Sucharow LLP, a firm with extensive experience in large securities fraud cases, is lead counsel.