Securities Litigation

Kasowitz regularly defends corporations, financial institutions, and directors and officers in securities actions brought by shareholders, debt holders and others.  The firm also actively represents corporations, financial institutions, and high-net-worth individuals in pursuing securities law violations by issuers and other market participants.

Some of the firm’s high-profile securities law representations include: 

• Federal Housing Finance Agency (“FHFA”), as conservator for Fannie Mae and Freddie Mac, in several actions in federal and state courts against numerous financial institutions and individuals. The lawsuits seek rescission or damages from the defendants for, among other things, defendants’ misrepresentations concerning pools of mortgage loans that underlie residential mortgage-backed securities issued and securitized by the defendants and sold to Fannie Mae and Freddie Mac.
• Loreley Financing, a CDO investor that lost billions of dollars in the collapse of the residential mortgage market in 2007.  Following investigation into possible fraud claims against arranging banks and collateral managers, Kasowitz sued Deutsche Bank in New York Supreme Court for knowingly selling Loreley almost $440 million in collateralized debt obligations backed by residential mortgage-backed securities that Deutsche Bank knew to be far riskier and far more prone to default than it had represented to Loreley.  The complaint alleged that Deutsche Bank used the CDOs to remove troubled assets from its own balance sheet at plaintiffs’ expense, while providing opportunities for short-trading on the part of Deutsche Bank and certain preferred clients.  Shortly after the complaint was filed in October 2011, the case was settled on confidential terms.  Kasowitz then filed an action on behalf of Loreley against Citigroup for $965 million alleging that Citigroup had committed fraud in inducing Loreley to invest in CDOs stocked with assets that had been selected by short investors.  Kasowitz also filed a similar $163 million claim against Wells Fargo Securities (as successor to Wachovia Capital Markets), and a $92 million claims against Bank of America/Merrill Lynch and Morgan Stanley.
• ACA Financial Guaranty Corporation, a monoline bond insurance company now operating in run-off, in an action against Goldman Sachs & Co. for fraud and unjust enrichment in connection with a synthetic collateralized debt obligation known as Abacus 2007-AC1 (“ABACUS”), which Goldman Sachs structured and marketed based on a portfolio of investment securities selected largely by its hedge fund client, Paulson & Co. Inc. ACA alleges that Goldman fraudulently induced it to take a long position in and provide guaranty insurance for ABACUS by deceiving ACA into believing that Paulson also was to be a long investor in ABACUS when in fact, as Goldman Sachs knew, Paulson intended to take an enormous short position in ABACUS, reaping nearly $1 billion when the portfolio failed.
• Comcast in defense of a series of securities and corporate governance actions arising from the collapse of Excite@Home, once one of the most recognized internet portals.  The firm’s lawyers secured a dismissal, in New York federal court, of the largest claim ever filed for disgorgement of short-swing profits pursuant to Section 16(b) of the Securities Exchange Act of 1934. 
• Royal Bank of Canada in the securities fraud putative class actions instituted as a result of Enron's demise, alleging that RBC participated in Enron's fraud and assisted Enron in misusing various complicated transactions and financial structures so as to overstate Enron's earnings and financial health, including the Newby class action.  The firm successfully obtained the dismissal of all claims against RBC. 
• Metropolitan Life Insurance Company and Lloyds TSB Bank plc in their actions against investment banks, indenture trustees, rating agencies and accountants, asserting violations of federal securities and New Jersey Blue Sky laws relating to their losses on holdings of more than $250 million of financial instruments issued by National Century Financial Enterprises, Inc., which has been described by the FBI as the largest ever corporate fraud case involving a privately held company.
• The Hartford Life Insurance Company in its securities fraud action against Bank of America in the federal multi-district litigation relating to the collapse of Parmalat Finanziaria S.p.A., asserting claims for violation of Sections 10(b) and 20(a) of the Exchange Act.  This case was settled favorably as it neared trial.
• Seven Norwegian municipalities in their securities fraud action against Citigroup Global Markets Inc. and Citigroup Alternative Investments LLC alleging that Citigroup misrepresented key elements of complex securities marketed and sold to the plaintiffs, resulting in over $110 million in damages.  The firm defeated Citigroup’s motions to dismiss the case on jurisdictional and pleading grounds.
• Stonepath Group, Inc. in defense of a securities fraud action filed by purchasers of Stonepath’s preferred stock.  The action resulted in the seminal decision by the Second Circuit Court of Appeals concerning the standard of reasonable reliance in 10(b)(5) cases. 
• Murray Capital Management in its securities fraud action against Exide Technologies, asserting Section 10(b) and 20(a) claims relating to Exide’s securities offering.  After the court dismissed the initial complaint prepared by another firm, Kasowitz was retained to prepare an amended complaint, and it successfully defeated Exide’s motion to dismiss that amended complaint, resulting in a confidential settlement. 
• The Special Committee of the Board of Directors of video-game maker Take-Two Interactive Software in connection with an internal investigation into potential stock option backdating as well as a shareholder derivative action alleging insider-trading and other misconduct. 
• A founder of the Fairfield Greenwich Group, the largest of the so-called feeder funds, in connection with the highly publicized litigation and regulatory actions arising out of the Madoff Ponzi scheme.