Insurer Woodmen of the World is suing U.S. Bank for nearly $30 million, charging that the bank invested the insurer’s assets in risky mortgage-backed securities that plummeted in value instead of the conservative investments that were promised.
Woodmen, which is based in Omaha, filed a federal lawsuit against the Minneapolis bank on Thursday, saying that it had lost $29.7 million because of how U.S. Bank invested cash Woodmen received as part of a stock-lending program. In addition, the insurer claims U.S. Bank failed to update it on the value of its investment when the mortgage-backed securities, which included toxic subprime and Alt-A mortgages, collapsed.
"U.S. Bank covered up its grossly negligent and reckless conduct, as well as its knowledge of the investments' deteriorating condition, until it was too late for Woodmen to exit the securities lending program without incurring substantial losses," according to the lawsuit.
"Woodmen remains financially strong," said Woodmen spokesman Steve Haack. He also said the losses incurred in the U.S. Bank program represent a relatively small part of the fraternal benefit organization's roughly $8 billion in assets.
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