After 11 years, investors of subprime lender Household International Inc. are finally beginning to see some closure in a drawn-out fraud case. On Oct. 17, a U.S. district judge ordered Household International — now a part of HSBC Holdings Ltd. — to pay $2.46 billion in a class action lawsuit after a jury previously found the company guilty of securities fraud.
U.S. District Judge Ronald A. Guzman of the Northern District of Illinois Eastern Division ruled that the 10,092 claimants in the class action suit were owed $1.48 billion in damages. Household International and three former executives must also pay a total of $986 million in prejudgment interest.
“We were able to show the jury overwhelming evidence of the defendants' fraud and demonstrate how investors suffered as a result,” Mike Dowd, lead trial attorney for the plaintiffs, told The Wall Street Journal (WSJ).
The payment comes from allegations that Household International misrepresented the interest rates it charged for loans and hid prepayment penalties in loan terms. The class action suit also claimed that Household International misled investors about the quality of its loans and its financial accounting over an 18-month period in 2001 and 2002.
A jury originally found Household International guilty in 2009 after a trial that lasted five weeks. However, because of the complexities of dealing with so many claimants, the court could not rule on a penalty for another four years.
HBSC purchased Household International in 2002. According to the WSJ, an HSBC spokesman said, “This matter has been noted in our filings for some time and this is the next legal step in an 11-year-old case.” He also claimed that the company planned to appeal the ruling, saying, “we believe we have a strong argument.”