"Over the past four or five years," she says, "we were continually encouraged in upper management meetings, retreats and conferences to push the stock. The president would pump the stocks as 'always going to the moon, that it was going to hit 100's'. All the while he was personally filing in advance as he sold off his stock, knowing full well that stock value was not going to increase. Business was failing even in October, November, December, and January 2007. Even in February he was still doing it."
The Seattle-based consumer bank and mortgage lender has been severely criticized since last fall for the dismal performance of Washington Mutual stock. Between September 13 and November 1, 2007 the news got steadily worse: the company cut one thousand jobs, closed its prized loan subsidiary, announced third-quarter sales impacted up to 75 percent by the subprime mortgage market, revealed third-quarter losses of $210 million, and to top it off, New York's attorney general sued the company's main appraiser for conspiring to provide rigged or inflated appraisals.
"It started in 2006," recalls Renee, "when senior management encouraged employees nationwide to participate in one of three different programs in which employees could get stock. They were: 401(k) savings, a bank match if stocks were purchased at a reduced price, say 10 percent, they would get additional shares, and the ERISA retirement-type accounts. They encouraged employees to shift from having a balanced mix of 401(k) or ERISA accounts to actually putting in a bank stock instead of a mutual fund. That was mainly done to push stock price up when they were failing."
Federal law set the minimum standards for health and pension plans set up by private companies but it is the obligation of the company's fiduciary to monitor investment options, eliminate imprudent investment vehicles and to warn of risky investments. In the case of Washington Mutual, director and chair of the finance committee Mary Pugh says that the financial risks were greatly discussed on the board, and in hindsight they could have moved faster, but she maintains that the board directed the company in the right direction to reduce potential exposure.
Renee is also familiar with the inner motivations of the company, having heard it first-hand. "I started questioning because of the nationwide mortgage market failing," she says, "and logic would tell you that stock was not going to maintain itself. This was a large portion of our business, so it just didn't make sense."
Washington Mutual held billions in subprime mortgages of their own origin, many of which have gone to foreclosure and allegedly contributed to the decreased stock values and employee plans.
"When I found out things weren't as they were being touted," Renee says, "I refused to follow company line to tell employees to continue purchasing stock. It wasn't right. Instead, I decided it was time to leave - I'd worked there 22 years. Washington Mutual questioned why I was leaving, I told them, and they asked me to sign a secrecy agreement and an arbitration agreement, which I did not.
On a personal level, I had 7,000 shares when I left. At one point they were worth $48, today they're worth $10. That's $150,000 gone but I'm not going to pursue them legally. In the end I'd rather just move on. But I do know of another thousand people who have lost lots of money. Washington Mutual is the target of 34 lawsuits by its employees in California alone."
The company is indeed facing a tidal wave of suits. Some filed federally, some in local courts. Plaintiffs are pressing in from all sides, ranging from major pension funds such as New York fire and police, individuals, Ontario Teachers Pension Plan Fund, the state of Massachusetts and the city of Philadelphia.
At least 16 of those have recently been moved to a single jurisdiction, federal court in Seattle and will be consolidated by type: ERISA, derivatives and securities.
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"What I think should have happened is that the president be removed," adds Renee. "The board was fully aware of the situation. And I think this is true of lots of companies in America where the CEO has friends he went to school with on the board and Americans are buying his stock and the numbers are all hyped and it's all controlled. It's a kind of American way of structuring business and it's wrong."
If you are wondering if it is possible to recover lost stock value from ERISA account plans, or how to proceed, seeking the advice of a lawyer may provide the next step.