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W.Va. not overwhelmed by Countrywide settlement

By Kelly Holleran | Oct 8, 2008



CHARLESTON, W.Va. (Legal Newsline) - Mortgage lender Countrywide has reached an $8.68 billion settlement with 11 states. West Virginia is not one of them.

The Mountain State also is not part of a settlement 34 states reached with pharmaceutical manufacturer Eli Lilly & Co.

That's because Attorney General Darrell McGraw's office still is reviewing the Countrywide settlement and is still part of ongoing litigation with Eli Lilly.

"There's a lot of controversy surrounding the settlement and whether it is in the best interest of the citizens," Chief Deputy AG Fran Hughes said of the Countrywide settlement. "We're not going to do something that would obtain less relief for West Virginia consumers."

The 11-state settlement -- reached between Countrywide Home Loans, Countrywide Financial Corp. and Full Spectrum Lending -- will allow eligible subprime and pay-option mortgage borrowers to avoid foreclosure by taking out affordable loans.

States involved in the settlement include California, Arizona, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas and Washington.

In McGraw's Aug. 12 suit against the company, he seeks an injunction against Countrywide to keep it from engaging in fraudulent acts and awards of restitution to consumers who lost money from unlawful acts. He also wants to delete any negative credit history in such circumstances, civil penalties, court costs, attorneys' fees and other relief.

In referring to the Countrywide settlement, Hughes mentioned a Microsoft case in which a settlement was reached that provided laptop computers for students in every county of the state. The settlement would not have been reached if McGraw's office had agreed to an earlier deal, she said.

"If you remember the Microsoft case in which we were able to bring $18 million to West Virginia schools," she said. "In the past, our judgment has been pretty on target."

In another major settlement, Eli Lilly agreed Tuesday to pay $62 million to 34 states that had accused the company of deceptive marketing.

As part of the settlement, it agreed to place physicians in the role of providing oversight on all marketing materials released on Zyprexa and to only ship samples to medical practices that use the drug consistent with its labeling.

The company will have to reveal how much money it spends paying physicians to give speeches about Zyprexa to the medical community.

In McGraw's Feb. 28 suit against the company, he is seeking an order for the company to pay three times the amount of such benefits, payments or allowances paid under West Virginia's Medicaid program; unspecified equitable relief; a requirement that Lilly create a fund for the payment of costs of future medical care that will be paid by the state for injuries caused by the drug; civil penalties; interest; prejudgment interest and attorneys' fees.

An additional eleven states, including West Virginia, have pending lawsuits against Eli Lilly.

The other states are Arkansas, Connecticut, Idaho, Louisiana, Mississippi, Montana, New Mexico, Pennsylvania, South Carolina and Utah.

"We're in litigation with Eli Lilly and have been vigorously pursuing that," Hughes said. "We're still in the midst of that litigation."

In his suit against Eli Lilly, McGraw claims the Zyprexa, an atypical anti-psychotic drug the company makes, is the cause of an early on-set of diabetes.

The company should have known about the dangers as early as 1998 but did not change its warnings section on the package insert until Sept. 15, 2003, and did not send out a letter to physicians until March 1, 2004, the suit states.

He also claims the company promoted the drug to physicians in West Virginia for uses, such as depression, other than those approved by the FDA.

In his suit against Countrywide, McGraw claims the company sold loans with "risky, unconscionable terms," according to the complaint.

Some loans were made with little or no documentation to prove the consumer could pay the loan.

Other adjustable rate mortgage loans offered "an initial, or 'teaser' interest rate, that lasts for only 2 - 5 years and then adjusts to a higher unaffordable rate," the suit states.

McGraw claims some were pay option loans that allowed consumers to make monthly payments less than the interest that had accrued.

Some consumers were not required to put any money down on their homes. After 15 years of steady monthly payments, they owed a balloon payment of almost the original amount borrowed, McGraw said.

"Frequently, consumers either were not told about or did not understand these risky, unconscionable products or terms," the suit states. "If consumers did question these loans or terms, they were simply told they could refinance later."

West Virginia has one of the lowest foreclosure rates in the country.

The Federal Trade Commission is investigating Countrywide's loan-servicing practices, while the federal Department of Justice also has lawsuits against it pending.

Hughes said McGraw's office plans to review Monday's settlement before it decides what it is going to do.

"We are studying it and looking at it closely," she said. "We have a track record of obtaining billions for West Virginia customers."

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