Dynex Settlement in Teamsters Pension Fund Securities Fraud Case is Important Development for Asset-Backed Securities Class Actions

NEW YORK, Oct. 6, 2011 /PRNewswire-USNewswire/ -- The real estate trust Dynex Capital Inc. has agreed to pay $7.5 million to settle a New York class action lawsuit over securities fraud in the sale of bonds backed by thousands of loans on manufactured homes, according to Cohen Milstein Sellers & Toll PLLC.

In March 2011, U.S. District Judge Harold Baer issued one of the few decisions to ever have certified a class of investors pursuing federal fraud claims in connection with the sale of asset-backed bonds. The case is an important one for investors because it provides a road map for prosecuting fraud claims involving other asset backed bonds on a class-wide basis, according to Plaintiff's attorney Joel Laitman, of Cohen Milstein Sellers & Toll PLLC of New York City.

"We're pleased because the settlement represents a real recovery in terms of the percentage of maximum recoverable damages had Plaintiff prevailed on all aspects of liability and damages at trial and on appeal," said Laitman.

The lawsuit was filed in 2005 by Teamsters Local 445 Freight Division Pension Fund and Dynex lost multiple attempts to have the case thrown out of Court.  The settlement still must be approved by Judge Baer of the U.S. District Court, Southern District of New York.

The Plaintiff charged that Dynex, its subsidiary Merit Securities Corp., and senior executives at both companies lied about the quality of mobile home loans that were collateral for bonds sold as Merit Series 12-1 and Merit Series 13 from Feb. 7, 2000 to May 13, 2004.

According to the lawsuit, Dynex and its representatives made misleading statements that artificially inflated the value of the bonds, understated the amount of delinquencies and repossessions affecting the bonds and violated its own publicly stated underwriting guidelines in making poor-quality loans. Defendants also made false statements about the deteriorating performance of the downgraded bonds because the company was scrambling to protect itself in the midst of a dramatic financial collapse, the lawsuit charged.

The class is represented by Joel P. Laitman, Michael B. Eisenkraft, Christopher Lometti, Daniel B. Rehns, Kenneth M. Rehns and Richard A. Speirs of Cohen Milstein Sellers & Toll PLLC.

For more information about the case, Teamsters Local 445 Freight Division Pension Fund et. al. v. Dynex Capital Inc. et. al, U.S. District Court case number 2011-CV-260, visit http://www.cohenmilstein.com/cases/234/dynex-capital.

SOURCE Cohen Milstein Sellers & Toll PLLC