Institutional Investors Back Lawsuit Against Fortis for $2.5 Billion Loss

(January 10, 2011) — Institutional investors have accused Fortis NV, now known as Ageas and, prior to its collapse in 2008, the largest financial services company in Belgium and the Netherlands, of releasing misleading information about the company ahead of its downfall.

Investors have launched a claim accusing the Dutch/Belgian firm of enticing them to invest in the company as it was knowingly on the brink of collapse in 2008. The claim has alleged that between May 29, 2007 and October 14, 2008, Fortis’ inaccurate assessments caused shareholders to continue to invest in the troubled bank, which was heading toward insolvency. The claim argues that the Fortis board failed to provide timely, accurate information about its exposure to sub-prime mortgages in the US while gearing up for a major share issue during the summer of 2007 to finance the acquisition of ABN AMRO Bank.

“This is the appropriate reaction to the fraud perpetrated by Fortis against investors who relied upon the integrity of the market and the compliance of Fortis with its legal obligations,” Foundation director Alexander Reus said in a statement. The Foundation is currently being backed by US securities law firms Grant & Eisenhofer and Barroway Topaz as well as more than 140 institutional investors from Europe, the Americas (including the US) and Asia who claim they lost more than €2bn ($2.5bn) on their Fortis investments. In addition, about 2,000 individual investors have indicated an interest in joining the action.

The Foundation’s Dutch counsel Jan Hendrik Crucq added in a statement: “We are well prepared to pursue this case and believe that the Foundation is the correct representative body for all Fortis investors worldwide who are not able to pursue their rightful claims through US class actions. We believe the Dutch system will be equally effective in protecting their rights.”

The Foundation’s action — brought for the Utrecht court in the Netherlands — marks a major step in pursuing international securities claims in the wake of last year’s US Supreme Court decision in Morrison v. National Australia Bank, which ruled a class action by “foreign investors who have bought a stake in foreign companies on foreign stock markets” was inadmissible in a US court. According to a release, Barroway Topaz partner Stuart Berman called the Foundation “a historic new vehicle to address shareholder rights in the European market,” adding that the litigation offers a valuable template for investor recoveries outside the US.