SANTA ANA, Calif. (CN) – First American Corp. provided 260,000 false and inflated appraisals to Washington Mutual in the past 2 years, inflating its own share price through false and misleading statements, according to a shareholder derivative class action. The class claims First American did this through its subsidiary, eAppriaseIT.
The class claims WaMu was eAppraiseIT’s largest customer. Plaintiffs claim that Santa Ana-based “eAppriaseIT, at Washington Mutual’s urging, provided materially false and inflated appraisals for properties where Washington Mutual sought to originate a mortgage. This enabled Washington Mutual to engage in real estate mortgage transactions that would otherwise have been untenable had the property at issue been correctly appraised. Senior executives at First American were aware of and willing to accommodate the request to falsify appraisals. Washington Mutual’s competitive place in the market and profit were driven in large part by the number of mortgages it issued based upon artificially inflated appraisals issued by eAppriaseIT.”
The complaint adds: “On Nov. 1, 2007, the New York Attorney General filed a complaint alleging that beginning in Summer 2006, Washington Mutual put pressure on eAppriaseIT to increase the appraised value of homes. …
“Defendants’ improper appraisal practices during the relevant period [April 26, 2007 to the present]: (1) rendered the company’s statements about its compliance with ethical and legal guidelines materially false and misleading; (2) rendered defendants’ statements about the adequacy of the company’s internal controls materially false and misleading; (3) caused certain of the company’s reported financial information, including revenues associated with home appraisals, to be materially overstated throughout the relevant period; (4) caused the company’s loan loss reserves, provisions for doubtful account and contingent liabilities to be materially understated during the relevant period; and (5) caused defendants to report financial results that were in violation of GAAP.”
Plaintiffs are represented by lead counsel Glancy, Binkow & Goldberg of Los Angeles.