LexisNexis® Legal Newsroom
Mealey's Securities/D&O Liability - McGraw Hill, S&P To Pay $1.5B To Settle Fraud Claims Over Credit Ratings

WASHINGTON, D.C. - McGraw Hill Financial Inc. and its subsidiary, Standard & Poor's Financial Services LLC (S&P Financial), announced on Feb. 3 that they will pay a combined $1.5 billion to settle actions brought by the U.S. Department of Justice, the attorneys general of 19 states and the District of Columbia and a California state employee pension fund regarding ratings issued and surveilled by S&P Financial's business unit for certain mortgage-backed securities in violation of state and federal laws.

Mealey's Insurance - 5th Circuit Affirms Dismissal Of Suit Over DOJ's Subpoenas For Financial Data

NEW ORLEANS - A Fifth Circuit U.S. Court of Appeals panel on Nov. 21 affirmed the dismissal of a man's lawsuit claiming that the U.S. Department of Justice and U.S. Attorney's Office for the Southern District of Mississippi violated the Right to Financial Privacy Act (RFPA) when issuing subpoenas to financial institutions as part of their health care fraud investigation, holding that the man's claims were barred by the three-year statute of limitations (Frank B. McCune Jr. v. U.S. Department of Justice, et al., No. 14-60145, 5th Cir.; 2014 U.S. App. LEXIS 22146).

Mealey's IP/Tech - Judge: Computer Systems Fraud Was Efficient, Proximate Cause Of Bank's $485,000 Loss

ST. PAUL, Minn. - Because a computer systems fraud was the overriding cause of a bank insured's loss, the insured is entitled to summary judgment on its claim for breach of contract and the insurer owes coverage under a financial institution bond for the insured's loss arising from a fraudulent wire transfer, a Minnesota judge ruled Sept. 29 (State Bank of Bellingham v. BancInsure Inc., et al., No. 13-cv-0900, D. Minn.; 2014 U.S. Dist. LEXIS 136849).

Mealey's Insurance - Judge: Computer Systems Fraud Was Efficient, Proximate Cause Of Bank's $485,000 Loss

ST. PAUL, Minn. - Because a computer systems fraud was the overriding cause of a bank insured's loss, the insured is entitled to summary judgment on its claim for breach of contract and the insurer owes coverage under a financial institution bond for the insured's loss arising from a fraudulent wire transfer, a Minnesota judge ruled Sept. 29 (State Bank of Bellingham v. BancInsure Inc., et al., No. 13-cv-0900, D. Minn.; 2014 U.S. Dist. LEXIS 136849).

Mealey's Banking & Finance - Judge Orders Banks, Officer To Pay $1.3 Billion For Mortgage Fraud

NEW YORK - A New York federal judge on July 30 ordered Bank of America Corp., as successor to Countrywide Financial Corp. and Countrywide Home Loans, and a former Countrywide officer to pay $1.3 billion in damages in connection with Countrywide's residential mortgage lending business and a scheme to defraud Fannie Mae and Freddie Mac (United States of America, ex rel. Edward O'Donnell v. Countrywide Home Loans Inc., No. 12-cv-1422, S.D. N.Y.).

Mealey's Banking & Finance - Federal Agency Seeks $645M Penalty For Fraud Of Bankrupt Peregrine Financial

CHICAGO - The U.S. Commodities Futures Trading Commission (CFTC) on April 16 filed a brief in the U.S. District Court for the Northern District of Illinois seeking a $645 million penalty against bankrupt Peregrine Financial Group Inc. for what it calls "blatant fraud" related to when Peregrine's leader misappropriated in excess of $210 million customer funds and made false statements to the CFTC (U.S. Commodities Futures Trading Commission v. Peregrine Financial Group Inc., et al., No. 12-05383, N.D. Ill.).

Mealey's Bankruptcy - Federal Agency Seeks $645M Penalty For Fraud Of Bankrupt Peregrine Financial

CHICAGO - The U.S. Commodities Futures Trading Commission (CFTC) on April 16 filed a brief in the U.S. District Court for the Northern District of Illinois seeking a $645 million penalty against bankrupt Peregrine Financial Group Inc. for what it calls "blatant fraud" related to when Peregrine's leader misappropriated in excess of $210 million customer funds and made false statements to the CFTC (U.S. Commodities Futures Trading Commission v. Peregrine Financial Group Inc., et al., No. 12-05383, N.D. Ill.).

Mealey's Insurance - Federal Judge Dismisses Insurer's Fraud Claim Against Insurance Producers

SCRANTON, Pa. - An insurance company failed to assert a fraud claim against insurance producers based upon a refusal to pay under a producers agreement for a settlement the insurer paid that occurred due to the producers' error, a Pennsylvania federal judge ruled March 5, dismissing the claim based upon the "gist of the action" doctrine (United Financial Casualty Co. v. A.M. Skier Agency Inc., et al., No. 13-1291, M.D. Pa.; 2014 U.S. Dist. LEXIS 29111).

Mealey's Banking & Finance - US Bank: Standing Lacking For Broker's Fraud Action Tied To Peregrine Bankruptcy

CHICAGO - US Bank N.A. on Feb. 13 filed a brief in the U.S. District Court for the Northern District of Illinois supporting its motion to dismiss a lawsuit brought by a commodities broker that alleges that the bank was complicit in the fraud perpetrated by bankrupt Peregrine Financial Group Inc., which misappropriated $ 200 million in investment funds that were to remain segregated for individual customers (Fintec Group Inc. v. US Bank NA, No. 13-08076, N.D. Ill.).

Mealey's Bankruptcy - US Bank: Standing Lacking For Broker's Fraud Action Tied To Peregrine Bankruptcy

CHICAGO - US Bank N.A. on Feb. 13 filed a brief in the U.S. District Court for the Northern District of Illinois supporting its motion to dismiss a lawsuit brought by a commodities broker that alleges that the bank was complicit in the fraud perpetrated by bankrupt Peregrine Financial Group Inc., which misappropriated $200 million in investment funds that were to remain segregated for individual customers (Fintec Group Inc. v. US Bank NA, No. 13-08076, N.D. Ill.).

Broker Files Putative Class Action, Says US Bank Was Complicit In Peregrine Fraud

CHICAGO - Fintec Group Inc., a commodities broker that did business with bankrupt Peregrine Financial Group Inc., on Nov. 11 filed a putative class action against US Bank NA in the U.S. District Court for the Northern District of Illinois, alleging that it was complicit in the fraud perpetrated by Peregrine, which misappropriated $200 million in customer-segregated funds (Fintec Group Inc. v. US Bank NA, No. 13-08076, N.D. Ill.).

Federal Jury Finds Bank Of America Guilty Of Mortgage Fraud

NEW YORK - A federal jury on Oct. 23 found Bank of America Corp., as successor to Countrywide Financial Corp., and a former Countrywide employee guilty of engaging in a scheme to defraud Fannie Mae and Freddie Mac in connection with Countrywide's residential mortgage lending business, according to a statement released by the U.S. Attorney for the Southern District of New York Preet Bharara (United States of America v. Bank of America Corp., et al., No. 12-1422, S.D. N.Y.).

Plaintiff's Counsel: $2.46 Billion Judgment In Fraud Suit Is Record

CHICAGO - A federal judge in Illinois on Oct. 17 entered a $2.46 billion judgment - the largest judgment following a securities class action trial, according to the lead plaintiff's counsel - against Household International Inc. (now HSBC Finance Corp.) and three of its former executives over allegedly fraudulent lending practices and financial reporting (Lawrence E. Jaffe Pension Plan v. Household International, Inc., et al., No. 02-5893, N.D. Ill.).

Judge Awards $175,000 To Insurer For Insurance Agents' Breach Of Contract, Fraud

LOS ANGELES - Insurance agents breached their contract and acted in fraud of their agency agreement with a life insurer, a California federal judge ruled Oct. 15, awarding a judgment in excess of $175,000 against the agents (United of Omaha Life Insurance Co. v. Crane Financial & Insurance Agency Inc., et al., No. 12-4614, C.D. Calif.; 2013 U.S. Dist. LEXIS 130142).

5th Circuit Affirms District Court, Finds Fraud Not Shown In Asset Purchase Agreement

NEW ORLEANS - A panel of the Fifth Circuit U.S. Court of Appeals on Oct. 2 affirmed the dismissal of a fraud lawsuit brought by a company against a lender related to the company's attempt to purchase the assets of a separate entity that had filed for bankruptcy on grounds that fraud was not shown (Scott Meyers v. Textron Financial Incorporated and Rocky Mountain Choppers LLC v. Textron Financial Corporation, No. 13-10023, Chapter 11, 5th Cir.; 2013 U.S. App. LEXIS 20175).

CFTC: U.S. Bank Is Liable For Fraud That Led To Peregrine Financial Bankruptcy

CEDAR RAPIDS, Iowa - The U.S. Commodity Futures Trading Commission (CFTC) on Aug. 15 filed a brief in the U.S. District Court for the Northern District of Iowa contending that U.S. Bank National Association is directly liable for the Ponzi scheme operated by Russell Wasendorf Sr., the former chief executive officer of bankrupt Peregrine Financial Group Inc. (CFTC v. U.S. Bank NA, No. 13-02041, Chapter 7, N.D. Iowa).

Judge: Failure To Identify Insurer's False Statements Dooms Fraud-Based Claims

HOUSTON - Despite having twice amended its complaint, an insured still failed to sufficiently identify any false statements made by its insurer, a Texas federal judge ruled June 19, granting a motion to dismiss the fraud-based claims against the insurer (Protectors Insurance and Financial Services LLC v. Lexington Insurance Co., No. 4:12-cv-03469, S.D. Texas; 2013 U.S. Dist. LEXIS 85726).

Federal Judge Dismisses Portions Of Suit Alleging Student Loan Fraud

FRESNO, Calif. - A federal judge in California on April 11 granted in part and denied in part a motion to dismiss a suit in which relators alleged that a school submitted false claims for federal student financial aid funds to the U.S. Department of Education (DOE), finding that the school's former employees sufficiently pleaded a violation of the False Claims Act (FCA) (United States of America, et al. v. Brightstar Education Group Inc., et al., No.11-0135, E.D. Calif.; 2013 U.S. Dist. LEXIS 52503).

Panel Affirms Coverage For $7M Fraud Loss Barred By Bond's Retroactive Date Rider

ATLANTA - The 11th Circuit U.S. Court of Appeals on April 9 affirmed a lower court's finding that coverage for an insurance premium financing company's $7 million fraud losses is barred by the retroactive date rider in a financial institution bond (ABCO Premium Finance LLC v. American International Group Inc., et al., No. 12-14780, 11th Cir.).

Peregrine Trustee Wants To Examine Former Accountant Regarding CEO's Fraud

CHICAGO - The trustee in the Chapter 7 bankruptcy of former financial company Peregrine Financial Group Inc. on March 19 moved in the U.S. Bankruptcy Court for the Northern District of Illinois for authorization to examine Peregrine's former accountant and other entities with which the accountant is affiliated (In Re: Peregrine Financial Group Inc., No. 12-27488, Chapter 7, N.D. Ill. Bkcy.).

Russell Wasendorf Gets 50-Year Sentence For Fraud Related To Peregrine Bankruptcy

CEDAR FALLS, Iowa - A federal judge in Iowa on Jan. 31 sentenced Russell R. Wasendorf, the former CEO of bankrupt Peregrine Financial Group Inc., to 50 years in federal prison for stealing more than $215.53 million in customer funds while he operated his commodities futures business (USA v. Russell R. Wasendorf Sr., No. 12-131, N.D. Iowa).

11th Circuit Reverses Dismissal Of Suit Over $675M Loan

ATLANTA - A district court wrongly dismissed a suit against a resort developer and its financial partner, the 11th Circuit U.S. Court of Appeals ruled Jan. 25, finding that fraud claims arising from a $675 million Credit Suisse AG loan are not subject to a forum-clause agreement (Mark Bailey, et al. v. ERG Enterprises LP, et al., No. 11-11670, 11th Cir.; 2013 U.S. App. LEXIS 1757).

U.S. Government Seeks Life In Prison For Fraud By Peregrine CEO Russell Wasendorf

CEDAR RAPIDS, Iowa - The U.S. government, which sued Peregrine Financial Group Inc. CEO Russell R. Wasendorf Sr. alleging securities fraud related to Peregrine's Chapter 7 bankruptcy filing, on Jan. 22 filed a memo in federal court calling for Wasendorf to be sentenced to life in prison (United States of America v. Russell R. Wasendorf Sr., No. 12-2021, N.D. Iowa).

Judge Won't Reconsider Ruling In Freddie Mac Securities Fraud Suit

NEW YORK - A federal judge in New York on Jan. 7 denied a motion for reconsideration filed by an underwriter defendant in a securities fraud lawsuit charging Ally Financial Inc., its subsidiary and eight underwriters with violations of state and federal securities law in connection with the sale of more than $6 billion in toxic mortgage-backed securities to Freddie Mac (Federal Housing Finance Agency v. Ally Financial Inc., et al., No. 11-7010, S.D. N.Y.).

Federal Judge: Suit Alleging College's Student Loan Fraud Can Continue

KANSAS CITY, Mo. - A federal judge in Missouri on Dec. 12 denied dismissal of a suit in which a college is alleged to have violated the False Claims Act, 31 U.S.C.S. § 3729-3733,  by making fraudulent representations to secure financial aid funds under Title IV of the Higher Education Act of 1965, finding that an amended complaint makes sufficient claims to survive the college's motion to dismiss (United States of America, ex rel. Chickoiyah Miller and Cathy Sillman, relators v. Weston Educational Inc., d/b/a Heritage College,  No. 11-00112, W.D. Mo.; 2012 U.S. Dist. LEXIS 175637). View a complimentary copy of the order in the pdf attached below.