SAN FRANCISCO (CN) – Wachovia Corp. defrauded shareholders by misleading them about its exposure to the subprime mortgage fiasco, a class action claims in Federal Court. The complaint focuses on Wachovia’s $24 billion purchase of Golden West Financial Corp., which was heavily exposed to risky, option adjustable rate mortgages.
The complaint states: “(D)efendants misled investors by falsely representing that Wachovia had strict and selective underwriting and loan origination practices and a conservative lending approach that set it apart from other lenders. Such reassurances were repeated by defendants throughout the class period in order to artificially support Wachovia’s stock price in the midst of a weakening mortgage market.” However, the complaint states, “despite assurance of its ‘conservative underwriting standards,’ Wachovia eventually admitted that, during the class period, it did not require a minimum credit score from potential borrowers or verify borrowers’ assets and employment before making a mortgage loan it planned to keep on its books.”
Wachovia’s price peaked at $58.77 during the class period, the complaint states. (It opened at $19.76 on Tuesday.) The class period is May 8, 2006 to April 11, 2008.
Plaintiffs lead counsel is Nicole Lavallee with Berman DeValerio Pease.