4/18/17 REUTERS LEGAL 20:51:34
Copyright (c) 2017 Thomson Reuters
April 18, 2017
Ocwen asks judge to throw out securities fraud lawsuit
(Reuters) – Lawyers for mortgage servicer Ocwen Financial have asked a federal judge to toss a securities fraud lawsuit accusing it of misleading investors by hiding servicing misconduct and potential conflicts of interest in 2013 and 2014.
In a motion on Monday in a West Palm Beach federal court, Ocwen’s lawyers said they have produced over a million pages of documents in the long-running case and plaintiffs have still not been able to find evidence supporting their fraud claims. The lawyers asked for a judgment in Ocwen’s favor before trial.
Filed in 2014, the lawsuit accused Ocwen of artificially inflating the price of its shares by hiding the risk of regulatory action over its servicing practices.
Ocwen’s shares fell 27 percent in December 2014 when the company agreed to pay $150 million to resolve claims by New York’s Department of Financial Services of improper foreclosures and other servicing problems, the lawsuit said.
Based in West Palm Beach, Ocwen is one of the country’s largest mortgage servicers, with more than 1.5 million customers, according to its website.
The lawsuit seeks damages for investors who bought Ocwen’s stock between May 2013 and December 2014.
Plaintiffs’ lawyer David Kessler declined to comment. Lawyers for Ocwen could not immediately be reached for comment.
According to the complaint, Ocwen falsely assured investors that it was complying with the government’s mortgage servicing guidelines and that its compliance set it apart from peers.
Specifically, Ocwen stated at a December 2013 investor presentation that it complied with the 2012 national mortgage settlement, an agreement between the U.S. government and five major banks accused of mortgage servicing abuses. Ocwen was not part of that settlement but had to abide by it after it acquired mortgages from the participating banks.
In reality, Ocwen’s servicing system was not able to accommodate the huge numbers of mortgages it acquired while complying with the settlement’s servicing requirements, the investors’ complaint said.
Ocwen also assured investors it had procedures in place to prevent conflicts of interest involving its then-chairman William Erbey, according to the complaint.
While serving as Ocwen’s chairman, Erbey also was a major shareholder in four mortgage-related businesses that he created and spun off from Ocwen, the lawsuit said. Ocwen failed to assure that Erbey recused himself from any transactions between Ocwen and Erbey’s related companies, the investors alleged.
In Monday’s motion, lawyers for Ocwen said the company’s statements that it complied with the settlement were true when they were made. Plaintiffs had cited potential violations found by the settlement’s monitor in December 2014, but that was one year after Ocwen made the compliance statement, the lawyers said.
Ocwen’s statements that it had practices in place to avoid conflicts of interest with Erbey’s related companies also were true, the lawyers said. Erbey recused himself on numerous occasions from transactions with related parties and those transactions were also reviewed by Ocwen’s board to ensure they were in the company’s best interest, the lawyers said.
The case is In re Ocwen Financial Corporation Securities Litigation, U.S. District Court, Southern District of Florida, No. 14-81057.
For the plaintiffs: David Kessler, Lee Rudy and Sharan Nirmul at Kessler Topaz Meltzer & Check and Joshua Katz at Sallah Astarita & Cox
For the defendant: Jeffrey Hirsch at Greenberg Traurig and John Coffey at Kramer Levin Naftalis & Frankel
—- Index References —-
Company: GREENBERG TRAURIG LLP; KRAMER LEVIN NAFTALIS AND FRANKEL LLP
News Subject: (Crime (1CR87); Financial Fraud (1FI18); Fraud (1FR30); Funding Instruments (1FU41); Securities Law (1SE59); Social Issues (1SO05))
Industry: (Banking (1BA20); Consumer Finance (1CO55); Financial Services (1FI37); Investment Management (1IN34); Mortgage Banking (1MO85); Retail Banking Services (1RE38); Securities Investment (1SE57))
Region: (Americas (1AM92); Florida (1FL79); North America (1NO39); U.S. Southeast Region (1SO88); USA (1US73))