Banking giants have been through tough times over the past decade or so owing to the global economic meltdown but HSBC has lurched from one controversy to the next with alarming regularity. The fallout from their Swiss operations dented the bank's reputation beyond measure but on Thursday last week, HSBC decided to end a shareholder class action suit that had been draggin on for 14 years. According to a report on Reuters, the class action suit will be paid by a unit of the global banking giant, "A unit of HSBC Holdings Plc (HSBA.L) said on Thursday it will pay $1.575 billion (1.11 billion pounds) to end a 14-year-old shareholder class action lawsuit stemming from the Household International consumer finance business that the British bank bought in 2003."
The Reuters report also provided the background of the case in question, "In litigation that began in 2002, Household shareholders accused that company of inflating its share price by concealing its poor lending practices and loan quality.The share price fell more than 50 percent from mid-2001 to October 2002, when Household agreed to pay $484 million to settle predatory lending claims by U.S. state regulators.HSBC began defending against the shareholder claims after buying Household for roughly $14.2 billion." As one can see, HSBC probably got away lightly.
Rob Sherman, a spokesperson for HSBC said, "We are pleased to resolve this 14-year case that's based on events that took place before HSBC acquired Household," It is interesting to note that three years ago the litigants had been awarded $2.46 billion by a court but the whole thing was dismissed by another court in Chicago, which then ordered a retrial. The retrial was ordered in order to establish whether there was any fraudulent activities involved in the fall in the price of Household. HSBC's purchase of Household has proven to be a financial disaster for the company considering the fact that the bank had to writedown loans worth billions and now with this class action suit pay off, it became a bigger misadventure for the bank.
