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Washington Mutual Settles Securities Lawsuit

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Seattle, WAWashington Mutual has reportedly reached a settlement in the securities lawsuit filed against it by shareholders. The securities fraud settlement is reportedly the largest ever in Western Washington and joins the ranks as one of the largest class-action settlements to stem from the financial meltdown. Plaintiffs filed the securities fraud litigation alleging Washington Mutual executives and directors violated securities laws.

According to The Seattle Times (07/01/11), Washington Mutual's shareholders will share part of the $208.5 million offered in the settlement. Those shareholders include pension plans, individual investors and investment funds, which alleged Washington Mutual executives failed in their duties to shareholders. The shareholders potentially hold almost 1.5 billion shares in Washington Mutual common stock and more than 10 million shares of preferred stock.

According to the lawsuit, Washington Mutual directors and executives assured investors that they were safe from certain losses even though the company offered high-risk mortgage loans. Plaintiffs alleged Washington Mutual executives made false and misleading statements to investors.

The Wall Street Journal (07/01/11) notes that an amended complaint filed in 2009 alleges Washington Mutual's financial circumstances, "rendered WaMu stock an unduly risky and inappropriate investment option for participants' retirement savings."

Washington Mutual filed for bankruptcy in September 2008.

In another large settlement, Wells Fargo reportedly agreed to settle lawsuits linked to the sale of mortgage pass-through certificates for $125 million. According to Reuters (07/07/11), the lawsuit was filed by a group of pension funds on behalf of holders of mortgage pass-through certificates. A spokesperson for Wells Fargo said the settlement is not an admission of guilt. The certificates in question were sold from 2005 through 2007.

Meanwhile, Morgan Keegan won a securities fraud lawsuit related to its sale of auction rate securities. According to Thomson Reuters (06/29/11), the Securities and Exchange Commission (SEC) filed suit against Morgan Keegan, alleging the financial firm hid the risks associated with auction rate debt. The SEC alleged that Morgan Keegan told customers the securities were a cash equivalent with zero risk.

A judge, however, dismissed the lawsuit, saying the company disclosed the risks to investors and was not responsible for problems with the auction rate securities market.


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