US - Five US funds face a race against time to ensure their complaint against the directors of Countrywide Financial continues.
The group alleged the directors of Countrywide allowed the company to abandon its loan underwriting standards, engage in predatory lending practices, fail to record appropriate loan loss reserves and fail to fairly value the impairments on its assets.
Blair Nicholas, co-lead counsel, Bernstein Litowitz Berger & Grossmann, explained the allegations that formed the basis of the funds' case: "Defendants' complete disregard of their fiduciary duties to the company has wiped out billions of dollars of shareholder value."
He continued: "Insiders reaped nearly $850m in insider trading proceeds and compounded Countrywide's problems by causing the company to buy back $2.4bn of its own stock at artificially inflated prices."
An amended complaint filed to the court of the Central District of California on 15 February requested a jury trial.
In this document, the plaintiffs cited the company directors' misconduct and breaches of duty as devastating its business and financial condition.
The legal process has been sped up in an attempt to receive a hearing date before the purchase of the company by Bank of America, which has been forecasted to complete in the third quarter of 2008.
The plaintiffs alleged the defendants had attempted to shield themselves from prosecution using the acquisition.
Nicholas commented on the deal: "It has the potential to insulate the defendants from liability as Bank of America has indicated in public filings that it will indemnify the defendants for their misconduct."
The funds standing as lead plaintiffs in the case are the Arkansas Teacher Retirement System, Fire & Police Pension Association of Colorado, Louisiana Municipal Police Employees' Retirement System, Public Employees Retirement System of Mississippi and Plaintiff Central Laborers Pension Fund. Countrywide and Bank of America were contacted, but did not comment on the case.
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