CIBC faces lawsuit over subprime exposure
TORONTO (Reuters) - Canadian Imperial Bank of Commerce is the first Canadian bank to face legal action over investments tied to plunging U.S. subprime mortgages, after a Toronto law firm revealed a proposed class action on Wednesday, claiming the bank and some executives failed to fully disclosure its exposure.
The lawsuit, filed in an Ontario court, alleges that the bank, President and Chief Executive Gerald McCaughey and other officers and directors, did not disclose the extent of CIBC's total exposure, through various structured-credit securities, to the sliding U.S. subprime mortgage market.
Their alleged misrepresentations artificially boosted the bank's share price, according to the 79-page claim, which was filed on Tuesday.
The allegations have not been proven in court.
CIBC, Canada's fifth-largest bank, has taken writedowns of C$6 billion ($6 billion) over the last two quarters as the value of various complex securities and hedges plunged in the wake of the U.S. subprime mortgage crisis.
The bank denied the allegations and said it would "vigorously" defend itself.
"CIBC is confident that, at all times, its conduct was appropriate and that its disclosure met applicable requirements," bank spokesman Rob McLeod said.
The suit, which has to be certified by the court to become a class action, alleges that CIBC executives misrepresented the magnitude and level of risk associated with its U.S. subprime mortgage investments, which had the effect of "artificially inflating" CIBC's stock in the period from May 31, 2007, to February 28, 2008.
Law firm Rochon Genova LLP is representing the plaintiff, businessman Howard Green of Thornhill, Ontario, and prospective class members. Continued...