Nebraska children's hospital foundation, funds sue Countrywide
A Nebraska hospital and several funds filed a lawsuit against Countrywide Financial Corp. this past week, alleging the lender caused substantial losses by misrepresenting the quality of mortgages held within its loan portfolio. Children's Hospital & Medical Center Foundation of Omaha, Hastings College Foundation, Peter Kiewit Foundation, Weitz Value Fund and several other funds filed the suit claiming that securities they acquired from Countrywide between March 2004 and November 2007 were tainted by the company's failure to disclose risky mortgage assets. The suit was filed in a California federal court. The suit includes testimony from former Countrywide employees who accuse the lender of everything from allowing the falsification of records to the doubling of incomes on loan applications, according to the lawsuit. A spokesperson for Bank of America (BAC) -- which acquired Countrywide in 2008 -- could not be immediately reached for comment. The plaintiffs claim Countrywide failed to disclose risks in its subprime portfolio, which resulted in inflated stock prices and substantial losses when the true value of the underlying assets caused the former lender's stock prices to plummet in 2008. The sudden drop in Countrywide's shares was soon followed by the company's quick sale to Bank of America. Countrywide securities and their dramatic loss in value after toxic mortgages were revealed is the subject of several major investor lawsuits. Recently, several institutional investors rebuffed a $624 million class-action settlement from Countrywide, saying the payout failed to recoup pension funds lost in the subprime debacle. One of the plaintiffs in that case — the state of Oregon — lost millions of dollars by investing state employee pension funds with Countrywide, they say. Write to Kerri Panchuk.