Lawyers cashing in on Class Action Lawsuits for Investors: What About Homeowners?

“I can’t predict the next scandal,” Mr. Berger said. “But I know that fraud is a growth industry, and so is greed.”

Editor’s Comment: Max W. Berger, partner of Bernstein Litowitz Berger & Grossmann, based in Manhattan has brought in over $1 Billion in damages for class action lawsuits filed ion behalf of investors. I’ve been predicting here that the amount of money that a lawyer can make correcting the malfeasance of the megabanks and servicers is staggering — far beyond profitable areas like personal injury and medical malpractice.

They are producing settlements rather than verdicts and judgments simply because the banks don’t really have a credible defense to what they did. They lied, cheated and stole. By diverting money from the securitization scheme that they said they were following and diverting the documentation away from the investors, as well as diverting huge payoffs and profits away from investors, the banks have screwed the investors (and all the pensioners and retirement account holders), screwed the taxpayers with creating false premises for bailouts, and screwed homeowners with false claims for foreclosures.

Is it time yet for lawyers to realize that even more money is to be made representing homeowners? The obstacles in the law create problems for certification of class actions but the possibilities remain. Any foreclosure pattern that REQUIRED the use of false documentation that was forged by unsophisticated clerks at the direction of the people who were claiming plausible deniability MUST be the target of such lawsuits and the answer to the problem of underwater mortgages, strategic defaults which are on the rise, and the limp economic recovery caused in large measure by the housing crash that cannot recover until the foreclosure scheme is stopped.

Lawyers for homeowners should be pouring through the discovery documents and pleading of the cases filed for investors, There they will find a treasure trove of information that drove the banks into offering billions in settlements of actions brought by civil action lawyers as well as government agencies. But the real question is why are the big name class action lawyers ignoring the horrendous damage to homeowners?

These lawyers have the resources and the knowledge that has been disclosed here on this blog and hundreds of other articles, mainstream news stories and bloggers across the country.

Iceland understood the problem and reduced household debt, bringing itself out from an actual economic depression into the fastest growth of western nations. Ireland is now about to require reductions in principal due to prevent the wave of foreclosures that has been hanging over that market as well, leading the way for other European countries to follow suit.

Each day thousands of lives are ruined by the false claims in foreclosures that dominate the “foreclosure industry” comprised of participants in a securitization chain to nowhere — the money wasn’t sent through that channel, the documents were diverted from that channel leaving the investors with nothing. Shareholders in the banks were misled and kept shares of the mega banks in their portfolios. Managed funds for pensions and retirement funds, have lost as much as 50% of their value endangering current pension benefits (a fact that will be revealed after the elections).

Why do I need to convince lawyers to make more money and do some good for society into action on behalf of homeowners when on the same facts, lawyers for the investors are making money hand over fist?

Business is booming for lawyers who care about investors, but not so much for lawyers representing the homeowners who were screwed worse than the investors. The homeowners in most cases have lost everything and more.

Their own pension benefits probably come from a managed funds that bought into the bogus mortgage bonds. Their pension benefits are in danger of being cut even while they lose their home and lifestyles from tricky defective mortgages that not even Alan Greenspan understood much less the unsophisticated home-buyer or homeowner refinancing homes that were in many cases in the family for generations.

Why is this so difficult for the lawyers and the judiciary to understand? Whose name would you put on the note and mortgage if you were lending money? Why wasn’t the name of the actual lender disclosed, much less shown as payee or mortgagee? If the REMIC trusts were real, no originator would have been allowed to place their name on the closing documents.

The money DID come from investors but did NOT come from the REMIC trusts that are alleged. The mortgage liens were not perfected and the underwriting process upon which the bank settlements with investors were based, was completely scuttled, especially where it came to intentionally inflated values of the property.

So where are the lawyers to take advantage of this huge opportunity where so much of the work has already been done for them by government agencies and class action lawyers for investors?

Investors’ Billion-Dollar Fraud Fighter

A few days after securing the largest shareholder recovery arising from the financial crisis – $2.43 billion from Bank of America – the plaintiffs’ lawyer Max W. Berger was not taking a victory lap.

“It makes me sad that in all of these scandals, no matter how good a job we do of getting results and inflicting pain, the government doesn’t seem to follow suit, and nobody learns, and it’s business as usual,” he said in an interview.

After a pregnant pause, Mr. Berger broke into a sly smile. He had another thought: “It gives us a lot of business, but it still makes me sad.”

With last month’s settlement with Bank of America, which resolved claims that the bank had misled shareholders about its acquisition of an ailing Merrill Lynch, Mr. Berger, 66, has now been responsible for six securities class-action settlements of more than $1 billion. His firm, Bernstein Litowitz Berger & Grossmann, based in Manhattan, has represented investors in five of the 10 largest securities-fraud recoveries. So far, it has recovered $4.5 billion for investors in cases connected to the subprime mortgage collapse.

“He is unquestionably one the giants of the plaintiffs’ bar,” said Brad S. Karp, the managing partner at Paul, Weiss, Rifkind, Wharton & Garrison, who represented Bank of America and has faced off against Mr. Berger in several other cases. “And what sets Max apart, beyond his talents as a lawyer, is that he’s a mensch, a person of real humility and integrity.”

There was a time, not too long ago, when the lions of the securities class-action bar were described in far less flattering terms. For decades, Melvyn I. Weiss and William S. Lerach, a pair of brash, crafty plaintiffs’ lawyers, dominated this lucrative pocket of the legal industry. Their firm, Milberg Weiss, revolutionized shareholder class-action suits by filing streams of cases against corporations, accusing them of accounting fraud. Critics called their aggressive tactics legalized blackmail. Congress passed laws aimed at reining in their practices.

The careers of Mr. Weiss and Mr. Lerach ended in disgrace in 2006, when their firm was indicted on charges that it had funneled illegal kickbacks to clients to induce them to sue. Mr. Weiss, Mr. Lerach and two other Milberg Weiss partners ultimately served prison terms. (It did not help the standing of the plaintiffs’ bar that at about the same time, Richard F. Scruggs, the Mississippi class-action lawyer, was imprisoned for trying to bribe a judge.)

“To be tarred by those brushes was very upsetting, but it was even worse to have everyone presume that we operated in the same way,” Mr. Berger said. “After they were charged, I can’t tell you how many people said, ‘Well, isn’t that what all of you do?’ ”

Yet a half-decade after Milberg’s downfall, there has been a shift in the public image and reputation of the securities class-action bar. The Bank of America settlement, which is still subject to judicial approval, comes at a moment when plaintiffs’ lawyers are being praised for extracting stiff penalties from banks related to their actions during the housing boom and the subsequent economic collapse. At the same time, resource-constrained government regulators have been criticized for not being tough enough.

In several cases, private plaintiffs have settled lawsuits for amounts far greater than the government received in similar actions. Bank of America, for instance, paid the Securities and Exchange Commission just $150 million to settle the commission’s lawsuit connected to the Merrill acquisition. Judge Jed S. Rakoff reluctantly approved the S.E.C. settlement, calling it “inadequate and misguided” and the dollar amount “paltry.”

“The securities class-action bar has come under relentless assault over the years,” said J. Robert Brown Jr., a corporate law professor at the University of Denver. “Yet these suits, especially the ones tied to the financial crisis, actually have had real value in the capital markets because companies need to know that there is a heavy price to pay for their misconduct.”

There are still detractors who scoff at that notion. These critics view securities class-action lawyers as bounty hunters who file nuisance lawsuits against deep-pocketed targets and then force them to settle rather than engage in costly litigation. They argue that the settlements have little deterrent effect because the payments almost always come from the corporations, not the executives and directors running the companies.

And questions have arisen over plaintiffs’ lawyers’ campaign contributions to local politicians who control the selection of legal counsel for shareholder lawsuits filed by public pension funds.

But even the most vocal opponents of securities-fraud class actions acknowledge that a variety of factors, including a combination of federal legislation and court rulings, have curbed abuses in the system. Many of the weakest cases are now thrown out earlier, and large institutional shareholders like state pension funds and insurance companies have taken greater control of the lawsuits.

They are also reining in the lawyers’ fees. In the past, plaintiffs’ lawyers received 20 percent to one-third of the settlement amount. Today the average fee award as a percentage of the recovery is much lower. In Bank of America, for example, Bernstein Litowitz and two other firms – Kessler Topaz Meltzer & Check and Kaplan Fox & Kilsheimer – are expected to ask for about $150 million, or 6 percent of the settlement.

“Things have definitely improved,” said Theodore H. Frank, an adjunct fellow at the Manhattan Institute and a longtime critic of abusive class actions. “Is it perfect? No. Is it better? Yes.”

Legal experts say the class actions filed after the financial crisis highlight the improvements. The lawsuits were far more risky and complex than the template “strike suits” that plaintiffs’ firms once churned out every time a company’s share price plummeted. And unlike large corporate scandals like Enron or WorldCom, there were no balance-sheet restatements or criminal convictions to use as evidence.

“We never viewed these cases as easy but felt we needed to be in them in a big way, so we really doubled down,” Mr. Berger said.

Bernstein Litowitz’s recent settlements read like a who’s who of the “too big to fail” era. Wachovia and its auditor paid its bondholders $627 million to resolve charges related to its mortgage holdings. Merrill Lynch settled claims that it had misled buyers of mortgage products for $315 million. Lehman Brothers’ underwriters paid $426 million to end a lawsuit over its stock sales. Washington Mutual’s underwriters and insurers paid $205 million to investors in the now-collapsed bank.

The big mortgage-related settlements are expected to add up to hundreds of millions in fees for Bernstein Litowitz, a 52-lawyer firm. Mr. Berger and his three founding partners started the firm in 1983 after splitting off from Kreindler & Kreindler, a plaintiffs’ firm best known for its aviation-disaster litigation.

The Bank of America settlement is a boon for the firm, ending nearly four years of bruising litigation and coming less than a month before it was set for trial. The lawsuit accused Bank of America of concealing from its shareholders, who were voting on the Merrill acquisition, the billions of dollars in mounting losses at Merrill, as well as billions in bonuses being paid out to Merrill executives.

Bernstein Litowitz and two other firms represented five plaintiffs: two Ohio pension funds, a Texas pension fund and two European pensions. Working with Mr. Berger on the case were his partners Mark Lebovitch, Hannah Ross and Steven B. Singer.

“This case will now serve as Exhibit A for corporate directors tempted to withhold information from shareholders,” Mr. Berger said. “The message isn’t complicated: Just tell the truth.”

New matters, meanwhile, are coming in. Bernstein Litowitz was appointed lead plaintiffs’ counsel in a lawsuit against JPMorgan Chase related to the bank’s multibillion-dollar trading loss out of a unit in London. And it is involved in the litigation against Facebook and Morgan Stanley over the social networking company’s botched initial public offering of stock.

Mr. Berger said finding cases had rarely been a problem.

“I can’t predict the next scandal,” Mr. Berger said. “But I know that fraud is a growth industry, and so is greed.”

21 Responses

  1. Linda don’t cash it. Frame it and so our survivors have evidence of the great sellout

  2. Yep. We got a grand total of $178. in the State of CA v. Wachovia.

  3. And I’m very. I can’t work this keypad, I try. I’ll try harder

  4. MERS in Wonderland …. Yes! Yes! We have Agency!
    MERS in Tin Buck Two …. No! No! We have no Agency!

  5. Louise. You have to ask for things in discovery it can be expensive and involve a few well lrelared depositions – first you gotta get discovery and that’s a task, then you ask for things that must be asked for correctly timely and have reasoning and be allowed under the rules of discovery it cant be outlandish and you line things up however you will cone up against tricks riad blicks and intimidation attbus juncture but opposition does and says things on the record which you then use to your advantage, every word in law counts so be careful and do not be taken off track, It’s like the old saying and one of my favorites- give em enough rope and they will hang themselves. Truth works like that. Stay strong stay In Truth and ask fir devine guidance. do not bang on the castle door with a head of lettuce go around the back and climb in through an accessible window.
    Just keep on. I’m pro se not a lawyer I’m sure that is transparent lol but this is what I have experienced thus far. If you can get a lawyer get a good one ask a lot of questions get a feel for their Ethos the bad attitude ones will give themselves away if you pay attention But there are good ones that are ethical and have a conscience I just wish they were affordable.

  6. MERS (bankster owned) is Tumbling either way the Ball Bounces. Wouldnt you Agree?

  7. @Matt … I’d say that agency relationhip the Judge found, open a Big Can of Worms for MERS.

  8. Nice Enraged … so True!


  10. That was appearing real not spearing real. Oops again

  11. Fear- false evidence spearing real
    And the comment fraud bring a growth industry as is greed. This is typical of a consciousness of never enough eventually the lack of whatever they seek is being sought via the devils methods and is doomed

  12. CNN reporting fraudclosed homeowners rushing to re register to vote….Wonder who they will vote for…?

  13. The us just filed fraud suit on Wells


    Not quite on topic, but found this today. MERS is legit in the eyes of this Indiana justice.

  15. “…ending nearly four years of bruising litigation and coming less than a month before it was set for trial…”

    This illustrates what i keep saying over and over: the great majorities of all lawsuits, no matter whether BI, PD, foreclosure or anything else, settle before trial. If the only reason a homeowner wronged by servicer does not file suit and demand a jury trial is fear, that fear is irrational. Caving in to it is doing yourself a big disservice.

  16. CNBC guest just said people in fraudclosure are gaming the system…(EVEN THOUGH….THE FED ROBBED US BLIND & STILL ARE) ! CNBC anchor just said the FED & the U.S. TAXPAYERS can’t keep bailing out all of us moral hazard deadbeats…..! These people are traitors …… WE NEED TO SUE THE FED & JAIL THESE CROOKS AMERICA..!

  17. Louise….You have to tell the Judge there is fraud in the entire title history & in the foreclosure….he won’t want to be a party to the fraud….otherwise it is a giant land grab for the benefit of the FED….They want to be the biggest slumlords on the planet when they already pocketed all of our payments as usury and never paid back their ORIGINAL LOAN to the Treasury..

  18. Title on dirt runs both ways. Grantor grantee. Can’t have fraud on one end and not the other. Like Neil says two ends of the stick. I wish lawyers would mention this to judges locally. Maybe get judicial notice of MortgageIT paying $200 million to the US for fraud for FHA loan and then Fannie via servicer shows up with SAME MortgageIT crap loan and states in motions before local judge that the loan is fine, valid and properly perfected. It’s not. And probably why good defense lawyers can keep FL residents in their homes for 4 years. Like the article says though I would PREFER offense not defense.

  19. We should be exchanging the discovery on these investor lawsuits, but my question is: was there any discovery? Very little to almost no discovery produced in my case, and they got away with it. The Judge was obviously on their side, did not read my docs and did not require that the other side produce anything. Total lack of due process.

  20. I thought homeowners were also investors? There is a law firm in NY that has been trying to get the court to have them form a buyers committee to represent the buyers/creditors in the GMAC bankruptcy case….
    does anyone have any updates on this?

  21. This is a giant investor scam & heist of the American people. Nearly every dime we pay has been turned into a fraudulently induced tax for the benefit of the investors….the mortgages too… There are now too many investors because of what Wall Street did..we are almost bankrupt because of a QUADRILLION dollars in credit fraud committed by Wall Street…. 4 more years of Obama & the fraudulent inducement of the OBAMACARE TAX they will have successfully taxed 100% of our income….then it will be complete communism & microchipped slavery….& there will be no more personal wealth, property, freedom or independence for the 99%…Also beware of a flat tax…world tax…or any other new tax….its a sneaky way they are using to enslave US…

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