Three of Canada's largest banks are among the defendants named in a lawsuit against troubled American mortgage lender Countrywide Financial Corp., one of the casualties of the subprime mortgage meltdown.
Subsidiaries of the Royal Bank of Canada, Toronto-Dominion Bank and Bank of Nova Scotia are listed among defendants in a class-action filed yesterday by New York City Pension Funds and comptrollers for the city and state.
The New York authorities are suing a total of 26 banks and two accounting firms that did business with Countrywide Financial Corp., saying the companies failed to ensure that the beleaguered mortgage company was being honest with investors.
The firms were added as defendants yesterday in a class-action lawsuit already pending against Countrywide in California.
Two of the lead plaintiffs, New York State comptroller Thomas DiNapoli and City comptroller William Thompson Jr., oversee several huge government pension funds that invested in Countrywide securities.
"Countrywide's underwriters had a duty to investigate whether Countrywide was acting honestly," DiNapoli said. "Investors lost millions, and New Yorkers lost their homes. We can't sit idly by."
Thompson and DiNapoli said they had also filed new complaints against several Countrywide officers and directors who hadn't been named as defendants in the previous court action.
California-based Countrywide rose to become the largest U.S. mortgage lender but has been struggling amid rising mortgage defaults, particularly subprime loans to borrowers with questionable credit histories.
The expanded list of defendants includes: RBC Capital Markets Corp., RBC Dominion Securities Inc. and RBC Dain Rauscher Inc. – all part of the Royal Bank group – as well as Scotia Capital Inc. and TD Securities Inc.
Other defendants include some of the biggest names in the investment banking business, such as: ABN Amro; Barclays; Citigroup; Deutsche Bank; Goldman, Sachs; HSBC; J.P. Morgan; Lehman Brothers; and Morgan Stanley.
Accounting firms Grant Thornton and KPMG are also named as defendants.
Banc of America Securities LLC, another defendant, is a subsidiary of Bank of America Corp., which has announced it plans to buy Countrywide.
After posting a $1.2 billion (U.S.) loss in the quarter ended Sept. 30 – its first quarterly loss in 25 years – Countrywide said it would post a profit for 2007's final three months and through this year.
But most analysts expect Countrywide to post a fourth-quarter loss, and will be watching closely next Tuesday when the troubled mortgage lender reports its 2007 year-end results.
