High profile mortgage industry lawsuits will continue for some time and I’ll continue covering them. Here are three lesser known suits that have bubbled up.
(1) Taylor, Bean & Whitaker: the gift that keeps on giving. Most, if not every, mortgage company has an accounting firm. In what could be a very closely watched case, Deloitte Touche Tohmatsu, the world’s largest accounting and consulting firm, was sued for $7.6b Monday of failing to detect fraud during its audits of Taylor, Bean & Whitaker. Deloitte “certified TBW as a solvent, viable company with accurate financial statements every year from 2001 to 2008,” one of the complaints said. “Despite Deloitte’s credentials and expertise as one of the ‘Big 4′ accounting firms, those statements — and the rosy picture they depicted of TBW — were completely false,” it said.
(2) Top Dot – does the company have $9 million to pony up? I hope so – it may owe just that due to a class action compensation judgment. A federal court entered a $9m judgment against Top Dot Mortgage for violations of the Fair Labor Standards Act. The class action suit was brought on behalf of 166 loan officers who were not properly paid minimum wage or overtime by Top Dot Mortgage and its individual owners. Under the FLSA, employees are entitled to wages for all hours worked and time-and-a-half pay for all time worked over 40 hours worked in a work week, unless they are exempt from the Act. Federal law also requires employers to maintain accurate records of hours actually worked by employees. “At trial, we proved that Top Dot willfully created a pay plan which denied its loan officers minimum and overtime wages in violation of federal law, while its individual owners wrongfully added millions of dollars to their personal income” said lead trial attorney Ryan Stephan. The jury specifically found that class members averaged 10 hours of unpaid overtime each week. Based on the total verdict, each of the 166 class members was awarded $54,000 on average – but let’s not forget the attorney’s cut!
(3) Many have wondered how the rating agencies have escaped punishment in the mortgage crisis. Well, that may be ending: the SEC may sue S&P for its rating of a 2007 mortgage debt offering. We all know that the three major agencies (S&P, Moody’s Investors Service and Fitch Ratings) gave high ratings to mortgage investments that turned out to be worthless. If the SEC charges S&P with violating securities laws, and it hasn’t happened yet, it would mark the first time it’s brought an enforcement action against a top rating agency. S&P is owned by New York-based McGraw-Hill. Regardless of the outcome of the S&P case, the entire rating agency industry may be facing enforcement actions related to the financial crisis.