October 23, 2008
Financial Products Litigation: The next big thing?
Just as the bursting of the tech bubble triggered the growth of patent-infringement litigation and gave rise to the era of the so-called “patent trolls,” we can expect the same thing with bursting of the credit bubble. And it seems as though credit-bubble litigation has arrived in Minnesota.
Apparently Robins, Kaplan, Miller & Ciresi filed suit against Wells Fargo for investing portions of certain institutional investors’ funds in risky securities (presumably backed by mortgages) after allegedly promising to invest the funds in money market accounts. According to the article:
>The plaintiffs, in a suit filed by consumer lawyer Mike Ciresi, charge that they are among many institutional clients nationally who were misled by Wells Fargo through a securities-lending operation that invested ‘billions of dollars in risky and/or illiquid securities … in a securities-lending program that it marketed and misrepresented to its clients as conservative and safe.’
> So far, estimated losses for the four plaintiffs appear to be more than $16 million on paper. The suit, served on Wells Fargo last week but not filed until Wednesday, comes after months of negotiations failed to achieve an agreement. It also comes amid a global financial storm through which Wells Fargo has navigated successfully, by most accounts.
The article also gives a hint at some enjoyable rhetoric from the complaint:
> The suit blasts public statements of Wells Fargo executives who have said the bank avoided most of the pain of the collapse of the subprime mortgage market and derivatives-market collapse by avoiding most of the risky practices.
> ‘Behind Wells Fargo’s closed doors, however, another reality exists,’ according to the complaint.
Interesting stuff.