HSBC Unit Ordered to Pay About $2.46 Billion in Lawsuit

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Susana Gonzalez/Bloomberg via Getty Images
NEW YORK -- A division of Europe's HSBC has been ordered to pay about $2.46 billion in a class action lawsuit claiming it violated federal securities laws.

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 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."

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 that 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."

The lawsuit named 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 loans and its financial accounting from March 23, 2001 through Oct. 11, 2002.

HSBC acquired consumer lender Household International in 2003. The acquisition made HSBC the biggest subprime lender in the U.S. at the time, which resulted in billions of losses to HSBC leading up to the financial crisis of 2008.

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 (HBC) U.S. shares shed 8 cents to $55.08 in premarket trading. They are up less than 2 percent for the year.

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investrman

All these banks screwed regular folks and now charge us even mroe costs than before.

HSBC sold off its credit card unit to Capital One and thysoe of us who were with them did not liek seeing this occur- As Capital One in pasts everal years was found to have done many dubious practices to clients and cardholders...

October 18 2013 at 8:14 AM Report abuse -1 rate up rate down Reply