Judge Lets Huge WaMu Securities Lawsuit Advance

A judge has refused to dismiss a multibillion dollar securities fraud case against former officers, directors, accountants and underwriters of Washington Mutual Bank, which collapsed last year in the biggest bank failure in U.S. history.

A few accusations and a $400 million securities issue were dropped from the case in the 40-page ruling late Tuesday by U.S. District Judge Marsha J. Pechman, but she refused to dismiss any of the defendants, including Kerry K. Killinger, who was chief executive of WaMu from its explosive growth after he took over in 1990 until shortly before it ran aground on Sept. 25, 2008.

"The plaintiffs are very pleased with the court's ruling," said Barry S. Keller, a lawyer for the Ontario Teachers Plan Fund, projected as lead plaintiff if the lawsuit is certified as a class action.

Barry M. Kaplan, Killinger's lawyer, was traveling and did not return a request for comment through his office. Jonathan C. Dickey, a lawyer for Goldman Sachs & Co., Morgan Stanley & Co. Inc. and 13 other underwriters of WaMu securities, would not comment.

Other ex-WaMu officers named as defendants in the lawsuit, a consolidation of three class-action cases, include four former executive vice presidents — Thomas Casey, chief financial officer; Stephen Rotella, chief operating officer; Ronald Cathcart, chief enterprise risk officer, and David Schneider, president of home loans.

The 267-page lawsuit focuses mainly on practices involving home loans, the bank's principal business, and on securities issued by WaMu and its subsidiaries from Oct. 19, 2005, to July 23, 2008.

The plaintiffs, described by Keller as "everything from mom and pop investors to sophisticated institutional funds," accuse WaMu executives and directors of misrepresenting the failed bank's lending practices and standards, concealing activity such as pressuring appraisers to inflate home values, and filing false and misleading reports with the Securities and Exchange Commission.