California AG Supports Billion Dollar False Claims Lawsuit Filed Against Lennar Corporation

Bernie Sanders and Elizabeth Warren yell and scream about crony capitalists, companies that take advantage of the public, customers and our communities.  Usually they are just blathering radical slogans.  In the case of Lennar Corporation, a nationwide developer of homes, they are right on target.  In a recent Court case in Delaware they told the Judge that the State of California has expunged all claims relating to the 2009 bankruptcy of their sister company Landsource. At that hearing  the California AG was forced to go to the Delaware court and say Lennar did not tell the truth, California did not do away with its claims—for ONE BILLION DOLLARS taken from CalPERS.

“In a bid to keep the case out of the California courts, Mr. Petrocelli conjured up a defense for client Lennar – asserting in a Delaware court proceeding initiated by Lennar’s lawyers – that Lennar had obtained “releases” of False Claims exposure from the California Attorney General back in a 2008 bankruptcy proceeding filed by Lennar on behalf of a controlled subsidiary named LandSource. Contrary to the assertions of Lennar’s lawyers, Federal, State, and even Congressional laws prevent the release, waiver, or discharge of False Claims Act liability.

The California Attorney General’s office has been actively monitoring the case since it was filed. A deputy Attorney General made a special appearance in the Delaware proceeding to specifically inform the judge that the Lennar lawyers were misleading the court. The deputy AG told the judge that ONLY the California Attorney General could release False Claims Act liability, and that NO releases of False Claims liability had EVER been obtained by Lennar. “

In the past Lennar has been found guilty in Massachusetts and Maryland courts, for somewhat the same type of actions—forced to pay hundreds of millions of dollars in those cases.  This case can cost them $3 billion (not a typo).  We will watch this as it goes forward.

California AG Supports Billion Dollar False Claims Lawsuit Filed Against Lennar Corporation

Stephen Frank, Exclusive to the California Political News and Views, 10/21/19  

A lawsuit has been filed in Sacramento against Lennar Corporation alleging the theft of ONE BILLION DOLLARS from CalPERS. The plaintiff is Citizens Against Corporate Crime LLC. The lawsuit is filed under the California False Claims Act on behalf of The People of California. The California Attorney General’s office has confirmed the validity of the claim.  

According to the complaint, Lennar – in a gross violation of public trust – engaged in an unconscionable swindle resulting in the theft of pension money from the firefighters, law enforcement personnel, state employees, and the many others that contribute to and rely on CalPERS. The complaint alleges that key Lennar executives – including COO Jonathan Jaffe and CEO Stuart Miller – implemented and directed this scheme in order to stave off the implosion and collapse of Lennar at the onset of the financial crisis beginning in 2007.

A key feature of the California False Claims Act is that the defendant is subject to treble damages, and certain penalties also apply. Lennars’ exposure in the case – including damages and penalties – exceeds THREE BILLION DOLLARS.

The California False Claims Act is a powerful statute. NOT ONE CASE filed under the Act has either been dismissed or gone all the way to trial in 17 years. All filed cases – and there have been many – have settled – generally on the State of California’s terms.

In many, and perhaps most California False Claims cases, private citizens – termed “relators” – take the lead in filing and prosecuting False Claims Act cases on behalf of the People of California – and that is what has occurred here.

Criminal charges are a possibility in the Lennar case. That consideration may have factored into the Lennar executives’ choice of defense counsel.

To defend this case, Lennar hired Los Angeles lawyer Daniel Petrocelli of O’Melveny & Myers.  The reader may recall that Mr. Petrocelli was Jeffrey Skilling’s criminal lawyer – who claimed in the Houston trial of Mr. Skilling that Enron was a “Shining Star”. A jury wholeheartedly disagreed, sending Mr. Skilling to Club Fed for 25 years.  Disgraced lawyer Michael Avenatti was recently quoted as saying that Mr. Petrocelli was his “mentor”.

In a bid to keep the case out of the California courts, Mr. Petrocelli conjured up a defense for client Lennar – asserting in a Delaware court proceeding initiated by Lennar’s lawyers – that Lennar had obtained “releases” of False Claims exposure from the California Attorney General back in a 2008 bankruptcy proceeding filed by Lennar on behalf of a controlled subsidiary named LandSource. Contrary to the assertions of Lennar’s lawyers, Federal, State, and even Congressional laws prevent the release, waiver, or discharge of False Claims Act liability.

The California Attorney General’s office has been actively monitoring the case since it was filed. A deputy Attorney General made a special appearance in the Delaware proceeding to specifically inform the judge that the Lennar lawyers were misleading the court. The deputy AG told the judge that ONLY the California Attorney General could release False Claims Act liability, and that NO releases of False Claims liability had EVER been obtained by Lennar.

Which leaves Lennar and its top executives fully exposed to this huge claim. The State of California through its Attorney General routinely prosecutes wrong-doers under the False Claims Act. Billions of dollars have been paid to California in settlements over the years in these cases.

Here, for example, is a recently-settled case right on point. A California False Claims Act lawsuit was filed against Morgan Stanley for defrauding CalPERS and CalSTRS. Morgan Stanley denied liability and vowed to “defend vigorously”. And they tried. But in an April 25, 2019 press release, AG Xavier Becerra announced a settlement with Morgan Stanley, saying “Morgan Stanley’s scheme resulted in millions in losses to CalPERS and CalSTRS”, and he also said “Today’s settlement holds Morgan Stanley accountable for misleading Californians who were unfairly blindsided. Our office has recovered over $1 billion from cheaters on Wall Street since the financial crisis. Our work isn’t over”.

Our work isn’t over” is the key phrase in this press release. The Lennar swindle may be the biggest single fraud committed against the State of California ever identified and prosecuted.

The complaint can be reviewed at www.citizensagainstcorporatecrime.com. This organization has taken the lead on exposing this fraud and bringing Lennar and its’ executives to justice. All California citizens will benefit from recovery of funds hijacked from CalPERS by Lennar.

We here at California Political News and Views have carefully reviewed the complaint, the underlying facts, and selected documents in this case. The case is a winner for the State of California. We support and applaud the effort to recover funds stolen by duplicitous Lennar executives from existing and prospective retirees, and encourage our readers to help support this effort.

Citizens Against Corporate Crime is actively soliciting contributions to aid in the efforts to bring Lennar and its executives to justice. Our readers are encouraged to visit the Citizens Against Corporate Crime website and make a contribution now.

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.