HSBC to pay $1.58 bn to resolve US shareholder class action lawsuit
17 June 2016
HSBC had agreed to make a payment of $1.58 billion to resolve a US shareholder class action lawsuit filed in 2002. The lawsuit pertained to the acquisition of US sub-prime group, Household International, by the lender.
In the 14-year-old lawsuit brought by Household's shareholders, it had been alleged that the company and a few of its employees such as former chief executive William Aldinger, chief financial officer David Schoenholz and Gary Gilmer, president of consumer lending, had made many false and misleading statements.
The statements regarding the company's lending practices, the quality of its loan portfolio and its financial results and had allegedly helped inflate the company's share price.
The lawsuit further alleged that Household, now called HSBC Finance, had not disclosed the quality of its loan portfolio and around the time of the HSBC acquisition. Household had agreed to shell out $484 million to settle legal charges that it used predatory borrowing practices in more than a dozen US states.
These practices allegedly deceived customers into paying extraordinarily high interest rates. The agreement to settle the legal charges had led a decline in Household's share price by over 50 per cent from mid-2001 to October 2002.
Meanwhile, US stocks rebounded, with the S&P 500 Index breaking its longest losing streak since February, even as speculation mounted on whether the UK would remain in the EU.
Equities pulled back from a 1 per cent selloff as both sides suspended campaigning on whether the UK should leave the EU after Labour Party lawmaker Jo Cox was murdered while she met constituents in her electoral district.
Cox favoured remaining in the EU, which fuelled speculation that voters could be more likely to choose to vote to remain in the EU in the referendum to be held next week.
The rally was led by phone companies and utilities and energy producers continued to be bogged down in the longest retreat in almost 10 months as crude continued to fall.