Hagens Berman Sobol Shapiro Announces Class Action Lawsuit Against Washington Mutual, Citing...

Company employees feeling effects of poor home loan and portfolio management by company executives

SEATTLE -- Washington Mutual (NYSE: WM) employees participating in the company's 401(k) plan filed a class-action lawsuit against the company, its CEO, board members and all other fiduciaries,

The suit claims that under ERISA fiduciaries are obligated to eliminate imprudent investment vehicles from 401(k) plans and to warn plan participants of risky investments. The suit alleges that the fiduciaries are legally responsible to restore any losses to the plan resulting from mismanagement. As of December 31, 2006 the plan held $341,404,922 in company stock and has since plummeted 60 percent.

"In recent months WaMu has been hit with investigations and lawsuits that call many of its basic business practices into question," said lead attorney and Hagens Berman Sobol Shapiro managing partner Steve Berman. "Now the effects of the company's mismanagement are trickling down to employees and WaMu is forcing them to take a hit where it hurts most -- through retirement and savings plans."

The suit alleges that while CEO Kerry Killinger and the insider-appointed benefits committee members had a fiduciary responsibility to warn employees of the company's precarious financial health they intentionally concealed information from plan participants.

Plaintiff Barbara Alexander, like many WaMu employees, deferred a portion of her salary and invested in the company savings plan. WaMu offers employees company stock funds as an investment option and plan fiduciaries are responsible for monitoring investment options and eliminating those that become imprudent.

According to the complaint, WaMu's involvement in the subprime mortgage industry contributed to the decrease in stock value and employee savings plans. WaMu held billions of dollars in subprime loans that it had originated and in the last year has seen many of those go into foreclosure.

The complaint goes on to explain that WaMu's risk was exacerbated by the fact that the company engaged in a fraudulent appraisal scheme under which it artificially inflated the appraised values of homes. This means the loans in WaMu's portfolio were inherently overvalued but when WaMu securitized those loans and sold them to investors they were perpetuating a massive fraud on investors that created another risk - WaMu would have to re-assume ownership of those loans if the scheme was revealed.