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Omaha-based Woodmen of the World Life Insurance Society has filed a lawsuit seeking $29.7 million that it claims U.S. Bank lost by investing in high-risk, mortgage-backed securities without the fraternal benefit company’s knowledge.
“We wouldn’t invest in subprime mortgages, ever,” Woodmen spokesman Steve Haack said Friday. “We believe that’s what happened in this situation.”
U.S. Bank spokesman Steve Dale said Woodmen had invested in a securities lending program at the Minneapolis-based bank, and U.S. Bank acted responsibly. Dale said he could not comment on specifics but said the bank would vigorously defend itself.
U.S. Bank’s flagship Nebraska offices are in Woodmen’s downtown office building. However, Woodmen officials were dealing with Minneapolis advisers for the investment arrangement, Haack said.
U.S. Bank is the sixth-largest commercial bank in the United States and one of the three largest in Nebraska.
Haack said Woodmen’s losses represented less than one-half of 1 percent of its nearly $8 billion in assets, but the company is committed to responsible management of its members’ money.
He said the lending program allowed stock that Woodmen owned to be lent to institutional investors on a short-term basis at a profit to Woodmen. U.S. Bank had assured Woodmen officials that the money kept as collateral would be put into high-quality investments, Haack said.
In March 2008, Woodmen asked about the safety of the investments because interest paid on them was shrinking, Haack said. U.S. Bank told Woodmen the investments were sound, Haack said, but a few months later U.S. Bank took measures to dissolve the fund and transferred the assets to another fund without Woodmen’s consent.
Haack said U.S. Bank would not tell Woodmen where its money had been invested until the insurance company signed a confidentiality agreement. Then Woodmen found out the investments were in riskier securities than it had been led to believe, Haack said.
Filed in U.S. District Court in Omaha, the suit accuses U.S. Bank of breach of contract and fiduciary duty, negligence, misrepresentation and concealment.
Contact the writer:
444-1117, joe.ruff@owh.com
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