The plaintiffs in one of the largest shareholder lawsuits against Washington Mutual executives have whittled down their complaint from more than 400 pages to just over 100, but still are leveling many of the same allegations.
The amended shareholder suit, filed in U.S. District Court in Seattle, is a response to Judge Marsha Pechman’s recent rejection of a chunk of the initial lawsuit, a ruling that marked a win to the defendants.
Pechman gave plaintiffs until Monday to re-file a complaint against WaMu executives. A number of WaMu executives are named in the lawsuit, including former chief executive Kerry Killinger. JPMorgan Chase, the new owner of Washington Mutual, also is named. The New York-based bank does not comment on pending litigation. The other defendants could not immediately be reached for comment.
Central to the suit is shareholders’ claim that executives kept a huge chunk of WaMu’s employee retirement plan invested in the bank’s stock, a move that resulted in a $300 million loss in the three years before the bank collapsed, according to the suit.
“Defendants failed to take any meaningful action to protect the (retirement plan), despite the precipitous decline in the value of Washington Mutual stock,” the suit alleges.
The shortened lawsuit features many of the same allegations revolving around WaMu’s mortgage lending and property appraisal system. The suit also states that WaMu was “seriously mismanaged at the highest levels” and that it “engaged in risky and potentially illegal lending practices.”
The suit cites WaMu’s “unquenchable thirst” for “garbage-like” loans, a strategy that “brought WaMu to its knees and threatened the world economy with a meltdown of epic proportions.”
WaMu also used a fraudulent appraisal system, according to the suit, even as it assured members of the retirement plan and other investors that its loan underwriting standards were sound.
In addition, the suit alleges that WaMu, “greatly increased its risk of catastrophic failure by engaging in a variety of questionable and highly aggressive accounting techniques — all designed to artificially inflate earnings and decrease or defer losses,” the suit states.
Parts of the 119-page suit are redacted for reasons that are unclear. A lawyer representing shareholders did not immediately return a call seeking comment.
Copyright 2009 bizjournals.com
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