GLOBAL - New York-based law firm Bernstein, Litowitz, Berger & Grossman (BLBG) has launched a separate division within its practice to deal with potential litigation against firms involved in the sub-prime crisis.
Officials at the firm say the division has been created "to protect the interests of "investors and consumer clients in the wake of the collapse of the subprime mortgage industry and the continuing revelations of misconduct by mortgage lenders, banks and rating agencies".
The firm is already lead counsel in US-led class actions against several subprime lenders but is also counsel to institutional investors and major US pension funds, including Ohio Public Employees' Retirement System and Ohio Teachers (the State Teachers Retirement System of Ohio).
At this stage, BLBG anticipates separate actions may be taken by individuals who obtained subprime mortgages, as well as institutional investors who believe they have been mislead in their holding of a firm's securities, as well as separate actions against companies who have invested in collateral debt obligations (CDOs) and mortgage-backed securities.
That said, ratings agencies could for the first time fall under the radar of potential class actions as the firm is advising clients on poential claims against lenders, investment banks and ratings agencies, according to Gerald Silk, a partner at BLBG.
"With the recent announcements of major write-downs being taken by leading financial as a result of exposure to subprime and other mortgage-backed investments, and the revelation that respected institutional investment managers were gambling their clients' retirement savings on investments in exotic investments, it has become clear that he collapse of numerous subprime lenders earlier this year marked just the tip of the iceberg," he said.
Silk will head up the subprime litigation practice group alongside fellow partner Salvatore Graziano, and be assisted by attorneys Avi Josefson, Mark Lebovitch and Noam Mandel.
This latest development comes on the same day UBS has been forced to announced a further $10bn write-down on the back of the subprime crisis this summer and its subsequent credit crunch. (See earlier IPE story: Concerns see Pearson remove UBS fund)