Washington Mutual settles class-action case for $208.5 million
Washington Mutual and several co-defendants settled a class-action lawsuit for $208.5 million filed by shareholders who lost money in the 2008 financial crisis.
To end the suit, which became a few shareholder class-action complaints combined into one, the defendant agreed to pay $105 million. In addition, the co-defendant underwriters, including Goldman Sachs ($164.15 0%) and Morgan Stanley ($26.32 0%), agreed to pay $85 million alongside an $18.5 million payment from co-defendant Deloitte.
In exchange, the lead plaintiff, the Ontario Teachers’ Pension Plan Board, agreed to drop all claims on behalf of the fund and similarly situated co-plaintiffs.
The settlement agreement was filed in the United States District Court Western District of Washington at Seattle.
The original case was filed three years ago after shareholders sued Washington Mutual for losses in the wake of the housing market collapse, claiming executives and the company caused stock prices to inflate by making "materially false and misleading statements about the effectiveness of WMI’s risk management procedures, the fairness and reliability of the appraisals received in connection with WMI’s loans, the quality of WMI’s underwriting practices and WMI’s financial results, including the appropriate allowances for its loan losses."
WaMu, one of the nation's largest subprime lenders, became the largest bank failure in U.S. history three years ago, resulting in the Office of Thrift Supervision's takeover of the bank and subsequent sale to JPMorgan Chase ($54.11 0%).
A bi-partisan Senate report on the 2008 financial crisis blamed WaMu's high-risk lending practices for the bank's painful failure. According to the Senate report, the percentage of Washington Mutual's high-risk originations rose dramatically from 19% in 2003 to 55% in 2006.
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