PNC to Pay $24- $70mm to Settle RICO Class Action Suit

Want to cause a banker to shudder with fear? Mention the word RICO. Short for the Racketeer Influenced and Corrupt Organizations Act, RICO is one of the most potent weapons against corrupt banks and bankers. A recent lawsuit against PNC Bank alleging the bank violated truth in lending and racketeering laws has tentatively settled. An arbitration panel appointed by a federal judge will determine the amount of the final settlement. PNC wants to pay just $24 million while the bank’s affected customers are demanding $70 million.

The case began in 2003. That year a group of borrowers sought to sue two banks, Guarantee National Bank of Tallahassee (GNBT) and Community Bank of Northern Virginia (CBNV). The latter has been acquired and is now operated by PNC Bank. A business called the Shumway / Bapst Organization devised a scheme to make high interest, mortgage backed loans to homeowners who were already struggling (predatory lending). Because Shumway was not a licensed depository lender, it decided to conspire GNBT and CBNV to write the loans.

After an audit by the Comptroller of the Currency in 2003, the scheme collapsed and victims of Shumway’s predatory lending scheme began to sue. Ultimately, six separate class actions emerged. The case against CBNV (now PNC) alleged that the bank violated RICO, the Real Estate Settlement Practices Act (RESPA) and a long list of consumer protection and usury laws.

RESPA prohibits kickbacks for referrals of federally backed residential mortgage loans. Borrowers claim that the banks were paying kickbacks to Shumway.

In July of 2003, the parties reached a tentative settlement. The parties agreed that on the RESPA claims, if the borrowers were to fully prevail at trial, the total recovery would be approximately $200 million. The proposed settlement had the class members receiving a total of $33 million.

A number of borrowers objected to the settlement and claimed they were not getting enough money for their losses. The objectors thought the total value of the claims could be as high as $3 billion. Although the trial judge ultimately approved the settlement, a federal appeals court later set aside the settlement. The borrowers would have to wait.

In the interim, the borrowers objecting to the settlement filed their own class action meaning there were now 7 class action cases regarding the Shumway loans. While the cases grinded along, the parties continued intermittently with settlement negotiations. In 2006, the parties negotiated a tentative $47.6 million settlement.

Just when it appeared the case would settle, one law firm objected and claimed the settlement was the result of collusion between the banks and the borrowers’ counsel. Once again, the settlement was approved and once again there was an appeal. In 2010, a three judge panel overturned the settlement and said the trial court needed to careful consider whether the lawyers for the class were “adequate representatives.” (Neither MahanyLaw nor Judge, Lang and Katers were involved in this case although we are presently involved in other litigation against PNC.)

After six more years of legal wrangling, the case is again settled. Under the current proposal, a three-member arbitration panel will determine whether the 26,698 class members should receive a total of $24 million as PNC wants or $70 million as the borrowers want. The panel has been given until March 31, 2017 to render a unanimous decision.

Objectors can still opt out although the case is so old, we expect few to do so. The loans in question were written between 1998 and 2003. 

RICO and Bank Lawsuits

RICO is one of the most powerful tools that can be wielded in the battle against bad bankers and banking misconduct. The law provides for both triple damages and legal fees. We believe that but for the RICO claims against PNC, the settlement in this case would be far lower.

We are two of the few law firms that both handle RICO lawsuits and sue banks. Very few lawyers do so. In fact, most true “lender liability” lawyers defend banks.

Our business clients can afford lawyers but many homeowners cannot. We believe that banks know this and deliberately get away with many schemes simply knowing that a borrower who can’t make a loan payment probably can’t afford a lawyer.

By participating in a group or class action, borrowers can join together and become a powerful force against evil banks. Once or twice per year, we look for and try to package class cases against big lenders. To do so, we need a class where there are a large number of people with very similar or identical claims against a single lender.

Participating in a class action is no substitute for quality, individual representation. We understand, however, that struggling borrowers often can’t even afford any representation. If you believe that you have a viable class, write to us at [hidden email].

We receive over 100 inquiries each week and cannot return every call, email and letter. Most inquiries we receive are for individual foreclosure cases. We simply cannot handle those outside Milwaukee County, Wisconsin. Although we are two nationwide boutique law practices, we limit ourselves to claims where actual damages exceed $5 million or class action cases. We regret that we can’t personally assist every struggling borrower or bank customer.

MahanyLaw and Judge, Lang & Katers – America’s Lender Liability Lawyers – We Sue Banks

Related topics: RICO (14) | RICO lawsuit (11) | lawyers that sue banks (27) | lender liability (43) | racketeering (11) | suing banks (35) | PNC | class action (2) | class action lawsuit | RESPA