Now that the dust has begun to settle on the financial crisis and Congress continues to work on a bailout plan, it is time to begin playing “the blame game,” says Scott A. Meyers, a partner in the litigation practice at Levenfeld Pearlstein LLC in Chicago, who has been involved in a number of high profile securities and white collar litigation matters.
“At this point it is only a matter of time until the banking and securities financial regulators, plaintiffs’ bar, and the Department of Justice drop the hammer and aggressively come after Wall Street,” Meyers says. “This could well make the post-Enron litigation surge look like traffic court by comparison, as I expect there to be a number of criminal and civil lawsuits filed against both individuals and institutions.”
He said an onslaught of lawsuits can be expected in part because a number of the potentially culpable institutions have been eliminated in the market collapse. Also many of the potentially culpable individuals not only have deep pockets as a result of their personal fortunes, but also may be covered by directors and officers (D&O) insurance, providing yet another source of recovery for plaintiffs.
He noted that experience under the Resolution Trust Corp., which was set up by the federal government to resolve the savings and loan crisis, could provide a window into what’s ahead.
“If history is any guide, the RTC was notorious for filing lawsuits against not just banking executives and other primary violators, but also individuals and institutions who allegedly aided and abetted, or otherwise participate in, the purported misconduct. This included a number of lawyers and accountants, for example, that wound up writing big checks to the government. If that was the RTC’s approach when it had $150 billion on the line, one can only imagine the legal carnage that will ensue with $700 billion at stake.”
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