(January 31, 2011) — Thein a bid to recover $65 million for its public pension funds.
“Protecting the hard-earned dollars of Michigan taxpayers from fraud is one of my top priorities,” said Attorney General Bill Schuette in a statement. In the complaint, the Attorney General’s office claims that Countrywide had effectively become a subprime lender while telling investors that it continued to maintain stringent mortgage loan underwriting standards that differentiated it from its competitors and subprime lenders. While Countrywide assured the market that it should not be impacted by a downturn in the housing market, Countrywide’s stock price dropped about 90%, from over $35 per share to about $5 per share between March 12, 2004 and March 7, 2008.
“Countrywide’s stock was artificially inflated during the class period because defendants made these false and misleading statements, which concealed their fundamental shift in core mortgage-related business strategy,” stated the release from Schuette’s office. “In addition, Countrywide also misstated their financial statements because reserves for loan losses, representation and warranty liability were materially understated.”
As one of the largest pension systems in the nation, the State of Michigan Retirement Systems (SMRS) holds combined assets of approximately $47.5 billion. The complaint, filed in federal court in Los Angeles, is State Treasurer of the State of Michigan v. Countrywide Financial Corp.
The suit by Michigan follows ainvolving state pensions suing financial firms for investment losses while the US housing market faltered. In November, Oregon sued former financial giant Bear Stearns & Co. to recover about $17 million in losses to the Oregon Public Employees Retirement Fund. Oregon Attorney General John Kroger was joined by Oregon Treasurer Ted Wheeler in bringing the suit.
The Oregon Attorney General alleged that the losses at Bear Stearns — accused of exaggerating the value and quality of the securities they sold — are directly attributable to misleading filings in connection with mortgage-backed securities. “We believe that these junk investments were intentionally mislabeled, and all Oregonians are still reeling from the economic fallout,” Oregon Treasurer Ted Wheeler said in a statement obtained by the Journal. “If you hurt Oregonians financially, we are coming after you.”
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