Credit Suisse Skirts National Century Trial with $400 Million Deal
Two years ago Forbes dubbed Kathy Patrick of Gibbs & Bruns "Wall Street's New Nightmare" for putting the squeeze on Bank of America and other banks on behalf of bondholders who lost billions investing in mortgage-backed securities. But for a group of banks and financial services firms stuck in litigation over the demise of National Century Financial Enterprises, the nightmare started at least a decade ago.
On Thursday the nightmare finally came to an end for Credit Suisse, the last major defendant in the NCFE litigation. Patrick and her firm announced that their bondholder clients had reached a $400 million settlement with the Swiss bank just weeks before a scheduled trial, resolving claims that the plaintiffs were defrauded to the tune of $2 billion when National Century collapsed amid a healthcare financing scandal in 2002.
According to Gibbs & Bruns the Credit Suisse settlement brings the bondholders' total recovery to $1 billion.
The case dates back to 2003, when several groups of bondholders filed suit in Arizona accusing a number of large financial institutions of selling billions of dollars worth of NCFE notes that were purportedly backed by high quality medical accounts receivable and substantial reserve funds, but were actually from failing healthcare providers. All of the other financial institutions named in the suit have settled, including JPMorgan Chase, Bank of America predecessor Bank One, PricewaterhouseCoopers, and Deloitte & Touche.
Credit Suisse also reached a separate settlement Thursday with Lloyds TSB Bank and Metropolitan Life Insurance Company over NCFE notes. The terms of that deal were not disclosed. Lloyds and MetLife were represented by Kasowitz, Benson, Torres & Friedman. Bingham McCutchen represented Credit Suisse in both cases.
The Gibbs & Bruns and Kasowitz cases were consolidated in multidistrict litigation before U.S. District Judge James Graham in Columbus, Ohio. They were remanded back to Arizona and but then transferred to the U.S. district court in Manhattan after Credit Suisse moved for a change of venue. Graham, sitting in New York by designation, was set to oversee trial in the case beginning in two weeks.
"Our clients are pleased that this last important chapter in the National Century litigation has come to an end," Patrick told us Thursday. She also noted that former National Century CEO Lance Poulsen remains a defendant in the case. Poulsen, however, is currently serving a 30-year prison sentence in Ohio for his role in the NCFE scandal. Patrick is due in court within ten days to tell Judge Graham whether or not she intends to pursue recovery from Poulsen, who's already facing a restitution order in excess of $1 billion.
Lloyds and MetLife lawyer Harold Levison of Kasowitz Benson didn't respond to a request for comment. Bingham McCutchen's Jeffrey Smith, who represents Credit Suisse, referred us to his client. "This agreement represents a full and final settlement in respect of this noteholder litigation against Credit Suisse," the bank said in a statement.