Care Initiatives, one of Iowa’s largest employers, a non-profit company operating 56 nursing homes, has been involved in grueling litigation for the last five years. It would appear that even a non-profit company can be affected by claims of profit, greed, and sexual harassment.

It all started when a former executive who was in line to become the next CEO accused the current CEO of sexual harassment. This lead to her firing (her job duties were investigated with a conclusion that she was not worthy of her position), her filing of a lawsuit and her recovery of over $1 million in settlement. The lawsuit took two years in which 10 years worth of Internet company e mails were turned over in discovery including, a computer hard drive.

As a result of the lawsuit, the Des Moines Register published an article about questionable profits and payments made by Care Initiatives. Thereafter, Care Initiatives was investigated for potential abuses of the federal nonprofit laws. At the same time, the former employee’s husband, who was a retired attorney, began sending a series of threatening e-mails to Care Initiatives and its attorneys, accusing them of tax fraud and refusing to return to the company 14 boxes of confidential documents produced in the lawsuit and ordered returned. Care Initiatives obtained an order for contempt and is now seeking $134,000 in sanctions against the employee and her husband.

Our advice to our clients is always to be careful of becoming adverse to employees who are charged with too much knowledge and information of the running of the company. It is also interesting to see how a case can easily get out of hand and affect anyone involved. Yet most important for the attorneys among us or those defending attorneys, is that when you proceed with a personal crusade disregarding a court order the price can be steep.

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Categories: Sexual Harassment

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The BankAtlantic subprime-related securities lawsuit by its shareholders and against its officers and directors is going to trial with jury selection starting this week in Miami. It is very rare that trials in securities class action cases proceed to trial.

Interestingly, the case is proceeding to trial after a partial granting of the shareholders’ summary judgment motion, finding that the statements of the bank executives regarding certain loans were false. Plaintiffs allege that the bank executives made misleading statements about the credit quality of certain land loans in the bank’s portfolio and failed to follow conservative lending practices, exposing it to higher level of risk than represented to investors, while telling investors that loss reserves were adequate. When the falsity of the statements was revealed between April and October 2007, the bank’s stock price fell.

The plaintiffs will still have to prove that these false statements were materially misleading, were made with scienter, and that they caused damages.

As typical of similar claims, the D&O cases only go so far. After that, the bank executives (including the FDIC who has taken over many of the failing banks ad made similar claims) begin blaming the loan brokers (most of whom are out of business) for not following the bank’s underwriting procedures, as well as the appraisers for over-valuing the secured properties. Yet, blaming the lenders is always a good defense for the loan brokers and appraisers, so it will be interesting to see how the jury penalizes the bank executives for not following their own practices and procedures.

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Categories: Banking | Mortgage Litigation

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