Swedbank’s internal investigation found that the bank did not follow a set of procedures required by law when processing investor lawsuit loans. The bank failed to obtain necessary approvals and instructions from the U.S. Office of the Comptroller of the Currency and Federal Reserve, according to internal reports. The bank also failed to follow regulations that are in place to ensure it processes its loan applications with caution and integrity. These findings come as a result of a three-year internal investigation conducted by Swedbank’s anti-fraud and anti-money laundering compliance department.
According to the complaint, filed by shareholders of Sberbank, the company repeatedly violated securities law. First, it fails to obtain appropriate approval from the federal government and state regulatory agencies before processing investor class action lawsuit loans. Second, it does not provide sufficient information to properly assess whether it is filing its applications with these agencies under the proper law. Third, it does not provide adequate safeguards against the possible risk of investor class action lawsuit filed by other shareholders who are not members of the investment firm. The plaintiffs further claim that it has engaged in improper and unethical practices in relation to its investor lawsuit loans by failing to conduct an internal investigation into these alleged failures. Among other things, the complaint states that Swedbank repeatedly violated the securities laws by failing to obtain necessary investor approval or to conduct appropriate internal investigations.
Another issue that was brought up in the investor lawsuit was the fact that Sberbank did not have proper control over information submitted to third parties about the status of its loan portfolio. Among other things, the complaint notes that Sberbank failed to maintain effective controls over its Blogger site. On one blogged article, for instance, it is alleged that the company provided inaccurate information to a hedge fund investor.
This is just one example of how investor suits have been used in lawsuits to force companies to change their ways. In the anti-money laundering case, for instance, the complaint alleged that a certain bank’s anti-money laundering program contained a number of design errors. It is also alleged that the bank systematically understated the amount of money that it held in accounts. In both instances, the bank has since settled with the government.
The increased risk faced by financial institutions face an increasingly litigious climate. This is partly because of the complexity of today’s financial markets and partly because of the unintended consequences of the Sarbanes-Oxley Act. In particular, as banks have increased their ability to sue individuals and companies, they have also increased their liability to those entities and to their shareholders. As more corporate directors continue to be forced to resign or be fired from their positions for violations of the anti-trust and anti-money laundering acts, the need to find other means of combating fraud becomes all the more urgent. These issues are likely to continue to fuel a vigorous debate among attorneys, media pundits, and shareholders for some time.
Of course, the threat of investor suits does not end with the loss of such suits. For many years, the United States Justice Department and the federal securities regulators have been vigorously pursuing securities fraud cases involving investment fraud. Deferred prosecution agreement agreements represent another important venue through which law firms can pursue justice for their clients and bring about the resolution of significant investor liability.
