August 2012

Bank of America on Tuesday moved to dismiss a class action accusing it of failing to disclose that AIG had threatened to sue the bank for misrepresenting the quality of mortgage-back securities. The plaintiffs allege the fraud came to light when the AIG suit was filed, and Bank of America’s stock dropped. Bank of America’s motion argues that the overall risk of mortgage-backed securities litigation was well known, even if the specific AIG suit wasn’t disclosed:
Continue Reading Bank of America Moves to Dismiss Class Action Alleging Failure to Disclose AIG Lawsuit

In the RICO litigation Chevron has brought to challenge an allegedly fraudulent multibillion dollar judgment against it in Ecuador, Judge Kaplan today denied, without prejudice, the motion of Patton Boggs, counsel to certain Ecuadorian citizens trying to enforce the judgment, to quash a subpoena from Chevron. As we blogged before, Patton Boggs’s motion argued that compliance with the subpoena would cost between $6-8 million. Judge Kaplan found that it was likely Patton Boggs had discoverable material, including potentially material covered by the crime-fraud exception to attorney-client privilege, and that a wholesale quashing of the subpoena was not justified. He concluded that Patton Boggs’s concerns about the burden of compliance were best addressed after the parties determined the proper scope of the subpoena, and chided both sides for “extraordinary stubbornness” in not having attempted to negotiate terms in the first place:
Continue Reading Judge Kaplan Denies, Without Prejudice, Patton Boggs’s Motion to Quash Chevron Subpoena and Orders Parties to Confer “In Person”

Last Friday, Judge Crotty denied the attempt of three former Fannie Mae executives to dismiss the SEC’s charges that they mislead investors about the company’s exposure to subprime mortgages. Judge Crotty found that the SEC had adequately alleged that Fannie Mae’s “quantitative subprime disclosures were misleading” because “they failed to include all loans that fell within [Fannie Mae’s] subprime and Alt-A description.” In allowing the SEC’s civil fraud suit to proceed, Judge Crotty rejected the defendants’ argument that they were exempt from liability because the Securities Exchange Act of 1934 does not apply to employees of any “independent establishment of the United States,” and Fannie Mae, as a government-sponsored enterprise chartered by the federal government, qualifies as such an establishment. Although Judge Crotty held that Fannie Mae is a government instrumentality, he concluded that it is not an “independent establishment” within the meaning of the Act given that it is a publicly-traded corporation managed and controlled by a Board of Directors elected by its shareholders.
Continue Reading Judge Crotty Rejects Ex-Fannie Mae Executives’ Bid to Dismiss SEC Charges