Northern District of California

SEC Files Lawsuit to Compel Compliance with Subpoenas Related to RMBS

On March 23, 2012, the SEC filed an administrative enforcement action against Wells Fargo & Co. in the Northern District of California seeking an order compelling Wells Fargo to comply with six subpoenas the agency issued to obtain information about the quality of RMBS that the bank sold. According to the SEC’s application, Wells Fargo has failed to respond adequately to the subpoenas, which seek documents regarding, among other things, the bank’s underwriting practices, the quality of the mortgage loans, compensation matters, and training materials. The SEC initiated the investigation in November 2010. Wells Fargo received a Wells notice from the SEC on February 24, 2012, following the issuance of the six subpoenas, and, according to the SEC, has refused to produce any documents since the Wells notice was issued. Application.

Pension Funds Move for Class Certification in RMBS Suit Against Wells Fargo

On February 11, 2011, lead plaintiffs moved for class certification in an action pending against Wells Fargo Bank in the Northern District of California that alleges Wells Fargo violated Sections 11 and 15 of the Securities Act in connection with the sale of more than $27.3 billion in RMBS. Lead plaintiffs, a number of pension funds, allege that the loans underlying the RMBS were riskier than disclosed in the offering documents. They seek certification of a class of all those who were damaged by buying or acquiring RMBS in 17 different offerings that occurred in 2006 and 2007 were traceable to three Wells Fargo registration statements from 2005 and 2006. Lead plaintiffs also moved to appoint Bernstein Litowitz Berger & Grossmann LLP as class counsel. Complaint.

CalPERS Sues Former Lehman Officers, Directors, and Underwriters for Misstatements and Omissions Related to Subprime and Alt-A Lending

On February 7, 2011, the California Public Employees’ Retirement System (“CalPERS”) filed suit in the Northern District of California against 12 former executive officers and directors of Lehman Brothers Holdings Inc. (“Lehman”) and Lehman’s underwriters, asserting claims under sections 10(b) and 20(a) of the Exchange Act and sections 11, 12(a) and 15 of the Securities Act for losses suffered in its June 2007 through September 2008 investments in Lehman common stock and bonds. The complaint alleges that during that period Lehman did not conduct proper due diligence when it securitized subprime and Alt-A loans and that Lehman failed to adequately disclose risks associated with subprime and Alt-A mortgages. CalPERS also alleges that Lehman failed to adequately disclose risks relating to increased leverage in its investments and that it manipulated its balance sheet by removing debt on a quarterly basis through the use of “Repo 105” transactions. Complaint.