Friday, October 18, 2013 9:53 am
HSBC unit ordered to pay $2.46B, plans to appeal
The Associated Press
The lawsuit named consumer mortgage lender Household International Inc., which is now HSBC Finance Corp., and former executives William Aldinger, David Schoenholz and Gary Gilmer. It claimed that the company fraudulently misled investors about its predatory lending practices, the quality of its home loans and its financial accounting from March 23, 2001 through Oct. 11, 2002. HSBC acquired Household International in 2003. The acquisition made HSBC the biggest subprime lender in the U.S. at the time, but resulted in billions of losses to HSBC leading up to the financial crisis of 2008.
Lawyers for the plaintiffs said that the judgment, which includes $1.48 billion in damages and nearly $1 billion in prejudgment interest, was the biggest ever following a securities fraud class action trial. HSBC Holdings PLC, Europe's biggest bank by market value, said in a statement on Friday that it will appeal, noting that it was "the next step in an 11-year-old case and we believe we have a strong argument."
The judgment "shows that the fraud committed by Household International and the individual defendant officers will not go unpunished, and we look forward to having the judgment affirmed on appeal," James Glickenhaus of Glickenhaus & Co., one of the three lead plaintiffs appointed by the court in 2002 to represent the class, said in a statement.
A jury in Chicago found in favor of the plaintiffs in May 2009. In the final judgment entered in the U.S. District Court Northern District of Illinois Eastern Division on Thursday, Household International, Aldinger, and Schoenholz are held jointly and severally liable for the judgment. Gilmer is held severally liable for 10 percent of the judgment.
HSBC's U.S. shares shed 32 cents to $54.84 in morning trading. They are up less than 2 percent for the year.