Cases

In re Washington Mutual, Inc., Securities Litigation

Court: United States District Court, Western District of Washington
Case Number: 07-cv-1809
Judge: Hon. Marsha J. Pechman
Case Contacts: Hannah Ross, Timothy A. DeLange, Katherine M. Sinderson

Securities class action filed on behalf of investors in Washington Mutual, Inc. ("Washington Mutual" or the "Company") against the Company, certain of its directors and executive officers, its auditor Deloitte & Touche LLP ("Deloitte"), and several major financial institutions (the "Underwriters") that underwrote the Company's securities offerings during the Class Period.

On May 7, 2008, the Honorable Marsha J. Pechman of the United States District Court for the Western District of Washington appointed Ontario Teachers' Pension Plan board ("Ontario Teachers") Lead Plaintiff and BLB&G Lead Counsel for the Class.

On August 5, 2008, BLB&G filed on behalf of Ontario Teachers and other investors a class action complaint detailing allegations of fraud in Washington Mutual's home loan business.  The complaint includes a discussion of just under ninety (90) statements from former Washington Mutual insiders and others obtained in the course of BLB&G's investigation, as well as previously undisclosed Washington Mutual documents, and expert analysis all supporting the allegations of wrongdoing in the complaint, including the misconduct of the Underwriters and Deloitte. On May 15, 2009, Judge Pechman sustained certain of the claims in the complaint while asking plaintiffs to replead the remaining claims.  On June 15, 2009, BLB&G filed an Amended Consolidated Class Action Complaint incorporating additional evidence obtained in the wake of WaMu's bankruptcy. On October 27, 2009, the Court largely sustained all of the claims in the Amended Complaint. On October 12, 2010, the Court Certified a class of investors in WaMu securities.

Lead Plaintiff Achieves $208.5 Million Recovery For The Class

On June 30, 2011, Lead Plaintiff submitted to the Court agreements to settle all claims against Defendants in the Action after the Defendants agreed to pay $208.5 million for the benefit of the Class.  Under the terms of the agreements, Washington Mutual's directors and officers agreed to pay $105 million; the Underwriters Defendant agreed to pay $85 million; and Deloitte agreed to pay $18.5 million.  The Settlements, which are subject to court approval, represent one of the largest settlements achieved in cases stemming from the financial crisis.

On July 21, 2011, the the Honorable Marsha J. Pechman preliminarily approved the Settlements and ordered that notice be sent to Class Members.  Judge Pechman scheduled a hearing (the "Settlement Hearing") for November 4, 2011 at 9:00 am at United States Courthouse, 700 Stewart Street, Seattle, WA 98101 .  The purpose of the Settlement Hearing will be to determine, among other things, whether the proposed Settlements are fair, reasonable and adequate and should be approved by the Court; whether the proposed Plan of Allocation for the settlement proceeds is fair and reasonable and should be approved; and whether Lead Counsel's motion for an award of attorneys' fees and reimbursement of litigation expenses should be approved.

PLEASE NOTE THE FOLLOWING KEY DATES WITH RESPECT TO THE SETTLEMENTS:

  • Deadline for Requesting Exclusion:       October 10, 2011
  • Deadline for Objections:                           October 10, 2011
  • Settlement Hearing:                                 November 4, 2011
  • Deadline for Filing a Proof of Claim:    December 8, 2011

For important information about the Settlements - including your rights in connection with the Settlements and whether you may be eligible to receive a distribution from the Settlements (if they are approved) - please obtain a full copy of the Notice and Proof of Claim Form from the Case Documents page or http://www.WashingtonMutualSecuritiesLitigationSettlement.com/.

Background

Until it was forced to declare bankruptcy on September 26, 2008 after its banking subsidiary was seized by federal regulators, Washington Mutual was one of the nation's largest originators and servicers of residential mortgages.  The Company had long represented itself to be a traditional low-risk depository institution and mortgage lender. In reality, in recent times and particularly in 2006 and 2007, it is alleged that Washington Mutual increasingly focused on high-risk and experimental mortgage products, while secretly abandoning proper standards of managing, conducting and accounting for its business.  For example, as alleged in a recent complaint filed by the Attorney General of the State of New York concerning First American Corporation's eAppraiseIT subsidiary, Washington Mutual elicited fraudulent appraisals from eAppraiseIT in order to increase its loan volume and further grow its mortgage lending business.  As alleged, this wrongful practice, among others, including the improper accounting for the Company's mortgage loans and deficient internal controls, caused the Company to defraud the investing public by issuing false and misleading financial statements and misrepresenting the nature of the Company's lending business.

In 2006 and 2007, with the direct participation of the Underwriters and Deloitte, the Company was able to raise nearly $5 billion through four securities offerings.  Each participant in Washington Mutual's securities offerings, including the Underwriters and Deloitte, were obligated by law to ensure that the statements made to investors in the offering materials were not false.  However, in offering these securities, neither the Company, its officers, its Board of Directors, Deloitte, nor the Underwriters disclosed the hidden weaknesses in the Company's lending practices and accounting policies.  Rather, as alleged in the Amended Consolidated Class Action Complaint, each of those securities offerings incorporated materially untrue information about the Company.

Ultimately, the Company's misconduct began to come to light in late 2007, when in a series of disclosures Washington Mutual announced a shocking 72% decline in the Company's earnings and the need to set aside more than $2 billion additional funds to cover expected loan losses.  Upon the disclosure of this news and other revelations about Washington Mutual's improper lending practices, the Company's stock price and the value of the securities made pursuant to the Company's offerings plummeted, and Washington Mutual's investors suffered billions of dollars of losses.