Insurer Woodmen Files $30M Lawsuit Against US Bank

JOSH FUNK

OMAHA, Neb. (AP) — Woodmen of the World wants U.S. Bank to pay nearly $30 million for investing some of the insurer's assets in risky mortgage-backed securities that plummeted in value instead of the conservative investments the bank promised.

Omaha-based Woodmen filed a federal lawsuit against the Minneapolis bank on Thursday. Woodmen said it had lost $29.7 million because of how U.S. Bank invested cash Woodmen received as part of a stock-lending program.

Woodmen says it agreed to lend stock it owned to traders through a U.S. Bank program that promised the cash collateral Woodmen received for the stock would be placed in conservative, high-quality investments.

Woodmen says U.S. Bank also failed to update Woodmen on the value of its investment when the mortgage-backed securities, which included toxic subprime and Alt-A mortgages, collapsed.

U.S. Bank spokesman Steve Dale said the bank believes it acted responsibly and will vigorously defend itself. But Dale declined to comment on the details of the lawsuit, which U.S. Bank has not yet received.

Woodmen says it was told in March 2008 that its cash investments were sound even though one or more of the mortgage-backed securities had already defaulted. Woodmen said it didn't find out the true state of its investments until July 2008 after U.S. Bank had liquidated some of the assets and restructured the fund.