Her $8.5 billion Bank of America settlement over bad mortgage deals was just the beginning. Now, backed by bond giants Pimco and BlackRock, Texas lawyer Kathy Patrick is gearing up for a new legal assault on the financial industry.
Nathan Vardi
Forbes
10/17/2011
This article appears in the November 7 edition of Forbes magazine.
The biggest private legal settlement in the history of Wall Street was a few sentences away from death. In early June a little-known Texas lawyer named Kathy Patrick was putting the final touches on her carefully crafted $8.5 billion deal with Bank of America over so-called mortgage put-backs, when she got a last-minute demand from the other side. Sitting in her Houston office, Patrick learned that BofA wanted her clients—a clutch of the world’s most important investment firms, including BlackRock and Pimco—to promise they would not go after the bank with separate claims over the same mortgage pools.
No way, she answered. As far as Patrick was concerned, she had made clear such a release was not on the table. Some of her clients had already filed securities claims against Bank of America. “It’s not every day that you write a letter to someone,” the 51-year-old says, “and tell them to take their $8.5 billion and shove it.”
Bank of America’s gambit turned out to be a bluff. On June 29 the nation’s largest bank announced it had struck the second-biggest legal settlement in American history, trailing only the 1998 tobacco master settlement. Three weeks later BofA reported an $8.8 billion quarterly loss, the start of a long and difficult summer in Charlotte.
Rather than celebrate a career-capping victory, Patrick viewed it a different way: round one. And that has Wall Street terrified right now.
Publicly the financial industry and the White House are dancing around a potential $20 billion settlement being forced on the nation’s biggest banks by state attorneys general over improper foreclosure practices. Quietly and without fanfare, Patrick and her 23 bondholding giants—one of the most powerful investor groups ever assembled for litigation—are gearing up for something equally big: a painful new reckoning for the mortgage-lending debacle, with most of Wall Street’s big banks in her crosshairs…
The article continues at Forbes.com
