California Court Reinstates Pension Suit Against Countrywide

(May 23, 2011) — A California appellate court has reinstated a pension fund suit against Countrywide Financial.

The lawsuit against Countrywide had been filed by several pension funds — including the Vermont Pension Investment Committee, the Washington State Plumbing & Pipefitting Pension Trust and the $10.6 billion Maine State Retirement System — which accused the firm of misleading investors into buying risky mortgage-backed securities between 2005 and 2007.

The financial firm had been the target of lawsuits by pensions who owned shares of Countrywide.

In late February, a federal judge in Los Angeles approved a deal for Bank of America, which took control of Countrywide during the financial crisis, to pay hundreds of millions of dollars to 33 investors, including pension funds, that filed a class action lawsuit against it for misleading investors about Countrywide’s deteriorating financial condition during the height of the financial crisis. Bank of America, the biggest US bank by assets, said it would pay $600 million to the New York State Common Retirement Fund and New York City pension funds that sued Countrywide. Despite the settlement, some institutional investors involved in the suit have rejected the court settlement and are trying to settle with Bank of America on their own terms, The Los Angeles Times reported. Those that pulled out of the agreement include BlackRock, the California Public Employees Retirement System, T. Rowe Price Group, Nuveen Investments, and the Maryland State Retirement and Pension System.

While Countrywide denied the charges, the firm settled the case as opposed to spending time and resources to defend it. “We are pleased that the judge approved the settlement as fair and reasonable,” Bank of America said in a statement.