Note: This article has been corrected; Max Berger’s co-counsel in the Merrill Lynch case was David Wales. Berger is the firm’s managing partner. Additionally, the recovery in the Wachovia Corp. case was $627 million.
Bernstein Litowitz Berger & Grossmann became prominent in litigation over the global credit crisis by starting at the beginning.
Or, more precisely, with the originators. The New York-based firm took lead roles in class actions targeting fraud by the originators of subprime mortgages, including the now-defunct New Century Financial Corp. That gave the firm’s lawyers a window into the mechanics of asset-backed deals that were not widely understood by the public before the credit crisis — knowledge that eventually would generate additional lawsuits and allow the recovery of more than $2 billion for investors.
“We got all these confidential witnesses and discovery and saw, ‘Holy! They were originating loans to everyone with a pulse,’ ” senior partner Gerald “Jerry” Silk said. “We’ve developed relationships with the most prominent experts testifying in that area.”
With that, the firm turned to the banks, which the lawyers now understood were packaging these loans but misrepresenting the risks involved.
Partner William Fredericks and managing partner Max Berger acted as co-lead counsel in a case against Wachovia Corp. and its auditors that settled in December for $627 million in the largest recovery from a securities case arising from the subprime-mortgage meltdown. The case, brought on behalf of bond and preferred-stock purchasers with co-lead counsel from Kessler Topaz Meltzer & Check, was noteworthy because there was no government involvement, according to information submitted by the firm.
In March, Berger and Mark Lebovitch were lead partners in the first recovery on behalf of investors in major issuers of mortgage-backed securities, with a $315 settlement with Merrill Lynch. That same month, Hannah Ross was lead partner in recovering $209 million for investors related to the failure of Washington Mutual Inc.
Now that the statute of limitations has expired on many of these losses, Bernstein is pressing common law fraud claims on behalf of major financial and insurance firms. “We approach this in a way to take a very complicated process, break it down, break down who the players are, and break it down in a way we can convey in a simple story what really happened here,” Silk said.