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Bank & Lender Liability Westlaw Journal Formerly Andrews Litigation Reporter BANK & LENDER LIABILITY Litigation News and Analysis • Legislation • Regulation • Expert Commentary VOLUME 16, ISSUE 4 / JULY 2, 2010 COMMENTARY WHAT’S INSIDE BREACH OF CONTRACT 11 Countrywide says mortgage The case for improved financial reporting: lender failed to buy back fraudulent loan A look at regulation of the global Countrywide Home Loans v. Bank of Ky. (C.D. Cal.) capital markets CRIMINAL LAW Katherine S. Montague and Andrew J. Walker of MainStreet Advisors discuss financial 12 Mortgage loan exec ran reporting and how it could be improved to better support the efficiency of the global 1.9 billion fraud scheme, feds capital markets. say SEE PAGE 3 United States v. Farkas (E.D. Va.) CYBERCRIME COMMENTARY 13 FTC approves settlement with restaurant chain over largest- ever data breach In re Dave & Buster’s (F.T.C.) Illinois mortgage foreclosure trends: Defense, HEDGE FUNDS loan modification and bankruptcy remedies 14 New York sues investment firm over Madoff advice Attorney David P. Leibowitz of Lakelaw discusses the increase in the number of fore- People v. Ivy Asset Mgmt. (N.Y. closures and bankruptcy in the Ohio and the options available to clients to save their Sup. Ct.) homes. SEE PAGE 7 MORTGAGE INSURANCE 15 Bank of America must face bad-faith claim Jones v. Bank of Am. (D. Ariz.) OVERDRAFT FEES RATINGS AGENCIES 16 Securities ratings are not ‘free Florida class action speech,’ California judge rules Cal. Pub. Employees’ Ret. Sys. v. challenges bank’s Moody’s Corp. (Cal. Super. Ct.) overdraft fee system SECURITIES ACT OF 1933 17 Subprime-related suit against A Florida class-action lawsuit claims Merrill Lynch goes forward Compass Bank acted illegally by rear- Miss. Pub. Employees’ Ret. ranging customers’ debit transactions in Sys. v. Merrill Lynch (S.D.N.Y.) an effort to maximize overdraft charges. 18 WaMu execs, investors spar in subprime mortgage suit Boilermakers Nat’l Annuity CONTINUED ON PAGE 10 Trust Fund v. WaMu Mortgage (W.D. Wash.) 40857735 TABLE OF CONTENTS Westlaw Journal Bank & Lender Liability Overdraft Fees: Anderson v. Compass Bank Published since September 1997 Florida class action challenges bank’s overdraft fee system (S.D. Fla.) ...........................................................1 Publisher: Mary Ellen Fox Commentary: By Katherine S. Montague and Andrew J. Walker, CFA Executive Editor: Jodine Mayberry The case for improved financial reporting: A look at regulation of the global capital markets ..................... 3 Production Coordinator: Tricia Gorman Managing Editor: Phyllis Lipka Skupien, Esq. Commentary: By David P. Leibowitz, Esq. Illinois mortgage foreclosure trends: Defense, loan modification and bankruptcy remedies ........................ 7 Editor: Catherine A. Tomasko [email protected] Breach of Contract: Countrywide Home Loans v. Bank of Ky. Countrywide says mortgage lender failed to buy back fraudulent loan (C.D. Cal.) ........................................11 Westlaw Journal Bank & Lender Liability (ISSN 2155-0700) is published biweekly by Criminal Law: United States v. Farkas Andrews Publications, a Thomson Reuters/ Mortgage loan exec ran $1.9 billion fraud scheme, feds say (E.D. Va.) ...........................................................12 West business. Andrews Publications Cybercrime: In re Dave & Buster’s 175 Strafford Avenue FTC approves settlement with restaurant chain over largest-ever data breach (F.T.C.) ................................13 Building 4, Suite 140 Wayne, PA 19087 Hedge Funds: People v. Ivy Asset Mgmt. 877-595-0449 New York sues investment firm over Madoff advice (N.Y. Sup. Ct.) .................................................................14 Fax: 800-220-1640 www.andrewsonline.com Mortgage Insurance: Jones v. Bank of Am. Customer service: 800-328-4880 Bank of America must face bad-faith claim (D. Ariz.) ......................................................................................15 For more information, or to subscribe, Ratings Agencies: Cal. Pub. Employees’ Ret. Sys. v. Moody’s Corp. please call 800-328-9352 or visit Securities ratings are not ‘free speech,’ California judge rules (Cal. Super. Ct.) .............................................16 west.thomsom.com. Securities Act of 1933: Miss. Pub. Employees’ Ret. Sys. v. Merrill Lynch Reproduction Authorization Subprime-related suit against Merrill Lynch goes forward (S.D.N.Y.) ............................................................17 Authorization to photocopy items for internal or personal use, or the internal or personal Securities Act of 1933: Boilermakers Nat’l Annuity Trust Fund v. WaMu Mortgage use by specific clients, is granted by Andrews WaMu execs, investors spar in subprime mortgage suit (W.D. Wash.) ...........................................................18 Publications for libraries or other users reg- istered with the Copyright Clearance Center News in Brief .....................................................................................................................................................19 (CCC) for a fee to be paid directly to the Copyright Clearance Center, 222 Rosewood Case and Document Index ..............................................................................................................................20 Drive, Danvers, MA 01923; 978-750-8400; www.copyright.com. How to Find Documents on Westlaw The Westlaw number of any opinion or trial filing is listed at the bottom of each article HOW TO SUBMIT A COMMENTARY OR BYLINED ARTICLE available. The numbers are configured like this: 2009 WL 000000. Sign in to Westlaw and on the “Welcome to Westlaw” page, West Publishing, a Thomson Reuters business, encourages its readers to submit commentaries type the Westlaw number into the box at or expert analysis on a variety of topics. Our focus includes trends affecting the legal community, the top left that says “Find this document by as well as issues arising from court rulings or legislative initiatives. Articles between 2,000 and citation” and click on “Go.” 2,500 words are preferred but other lengths will be considered. Please contact the editor of this publication, or contact Phyllis Skupien, Managing Editor, at [email protected] for more information. ABOUT ANDREWS Andrews Publications is a specialized information publisher focusing on litigation developments. A division of Thomson Reuters, Andrews produces newsletters and Westlaw databases tightly focused on more than 45 individual practice areas. Andrews’ softbound books and online contin- uing legal education courses draw on the expertise of legal practitioners and experts across the country to create a knowledge-sharing community. Andrews’ customers are lawyers, insurers, corporate counsel, medical groups, academics, government agencies and other professionals whose work requires up-to-date litigation information. 2 | WESTLAW JOURNAL n BANK & LENDER LIABILITY © 2010 Thomson Reuters COMMENTARY The case for improved financial reporting: A look at regulation of the global capital markets By Katherine S. Montague and Andrew J. Walker, CFA The debt crisis created by the subprime to understand the role such reporting plays Investors derive their confidence in the mortgage bubble and the ensuing global in the regulatory process. The markets for data released in financial reports based on recession have created a renewed focus on publicly traded debt and equity can even be the perceived quality and transparency of financial regulation and the government’s considered a supplement to governmental financial statements, as well as the corporate role in securing the financial system. At regulatory processes, as investors, in governance of the company. the time of this writing, the reconciled aggregate and in their own self-interest, Financial reports serve as an input to the financial regulatory reform bill has passed monitor the regulatory filings of the investment decision-making process, the U.S. House of Representatives and is companies they own. For these reasons, it allowing investors to influence security prices pending a vote in the Senate. Investors is important that we continue to improve the at securities exchanges, thus acting in a have eagerly awaited the final bill to have a transparency, timeliness and reliability of the market regulatory capacity. However, this better understanding of the future regulatory financial reporting process. process fails if the information investors have environment. relied upon is inadequate or not reflective The bill expands regulatory reach to the REGULATORS of current financial conditions within a monitoring of hedge funds and derivative In her book “Dear Mr. Buffett,” structured company. securities, creates a new consumer financial finance expert Janet Tavakoli says the This is particularly important because the protection agency, provides explicit authority global capital markets are “suffering from breakdown in the flow of accurate information to seize failing financial institutions, and too little competent regulation where it not only influences investor actions but also creates a new high-level council to monitor counts most.”3 When considering regulators, reduces confidence in the process. Realizing 1 systemic risk. traditional bodies such as the SEC, Federal this, the SEC has sought to improve investor These reforms ignore another important regulator: market participants who use the financial reports of publicly traded companies to value and trade public
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