NovaStar Financial Inc. has agreed to pay $7.25 million to settle a class-action securities-fraud lawsuit that originated in April 2004.
The settlement agreement, filed Monday in U.S. District Court for the Western District of Missouri, includes no admission of wrongdoing by Kansas City-based NovaStar.
Investors filed five class-action suits against the company in mid-April 2004 which later were consolidated. The suits alleged that the company misled investors by pointing to an increased number of brokerage offices throughout the country, some of which were later fined for not being properly registered or didn’t actually exist. The suits were filed a few days after an article in The Wall Street Journal detailed the Kansas City-based mortgage broker’s problems with certain branch offices.
NovaStar CFO Rodney Schwatken said Wednesday that the settlement was paid entirely through the company’s insurance.
"It’s what we expected all along," he said. "It’s unrealistic to think that in today’s sort of litigation world that we wouldn't have to enter a settlement."
NovaStar slashed its employee count and operations starting last year as it started sinking with the subprime mortgage meltdown. On Aug. 20, the company reported a second-quarter profit and a loss for the first half of 2008, and said its financial situation remained volatile.
If you were among the many people who suffered as a result of the deceitful practice of a stockbroker or financial advisor, contact the experienced financial fraud litigation attorney Thomas C. Bradley today for a free consultation.