U.S. shareholder law firm sets up subprime legal team

NEW YORK (Reuters) - A U.S. law firm that focuses on shareholder lawsuits against big corporations has formed a new team to deal with cases stemming from the subprime mortgage meltdown.

A newly sold home at a new housing subdivision is seen in San Marcos, California August 20, 2007. A U.S. law firm that focuses on bringing shareholder lawsuits against big corporations has formed a new practice group focused on court cases stemming from the subprime mortgage meltdown. REUTERS/Mike Blake

The new team formed by law firm Bernstein Litowitz Berger & Grossmann LLP comes as investors already have filed a flurry of lawsuits stemming from the collapse of the market for risky home loans.

Defendants in these cases include mortgage lenders as well as big banks accused of issuing false statements about losses tied to mortgage investments.

Class-action law firms see the subprime collapse as fertile ground for new investor litigation. Several firms that specialize in defending corporations against class-actions and other litigation have formed subprime task forces of their own.

“Our Subprime Litigation Practice Group will help ensure that the rights of institutional and individual investors, as well as consumers, are fully protected and will advise clients on potential claims against all participants, including lenders, investment banks and ratings agencies,” Gerald Silk, a Bernstein Litowitz partner, said in a statement on Monday.

The New York-based firm said the team will include Silk, partner Salvatore Graziano, and attorneys Avi Josefson, Mark Lebovitch and Noam Mandel, as well as about 10 other lawyers who are handling subprime-related cases.

Law firms often create Special practice teams to address hot areas and better market themselves to potential clients. Last year, some law firms created stock options task forces to work on matters related to backdating issues.

Among the subprime-related cases brought by Bernstein Litowitz is a lawsuit filed in U.S. District Court in California on behalf of institutional investors suing the chief executive of Countrywide Financial Corp CFC.N, Angelo Mozilo, and others for allegedly engaging in hundreds of millions of dollars worth of improper, insider stock sales.

In October, Mozilo said U.S. regulators had opened an informal inquiry into his stock sales. He and the company are cooperating with the inquiry, and Mozilo has said that “at no time” did he make any trading decisions based on material, nonpublic information.

Bernstein Litowitz is best known for negotiating settlements worth more than $6 billion for investors in the WorldCom Inc securities fraud litigation.

It also represented institutional investors in an options backdating case against former UnitedHealth Group Inc UNH.N CEO William McGuire and others. In a settlement announced last week, McGuire agreed to forfeit more than $400 million in stock options and retirement compensation, in addition to about $200 million in repriced options he already had given up.

Reporting by Martha Graybow; editing by John Wallace and Andre Grenon