September 28, 2009
Previously published on September 18, 2009
On July 30, 2009, the US District Court for the Eastern District of New York approved a $37.25 million settlement of a subprime-related securities class action styled, In re American Home Mortgage Securities Litigation.
American Home Mortgage filed for Chapter 11 bankruptcy protection in August 2007. The complaint, which named several of American Home Mortgage's directors and officers, Deloitte & Touche, and the underwriters of an offering of American Home Mortgage's common stock, alleged that American Home Mortgage issued materially false and misleading statements and failed to disclose that: (1) the Company was experiencing an increasing level of loan delinquencies which was depressing its earnings; (2) the Company was experiencing increasing difficulties in selling its loans and, therefore, was required to decrease prices, which reduced margins and profits; and (3) the Company was overstating its financial results by failing to write-down the value of certain of the loans in its portfolio as these loans had declined substantially in value.
As reported, the $37.25 million settlement is comprised of the following component payments: (1) $24 million from the individual defendants, funded by D&O insurance; (2) $4.75 million from Deloitte & Touche; and (3) $8.5 million from the underwriter defendants.
|