The Los Angeles city attorney's office accused officials at Deutsche Bank, a German financial institution, of being among "the largest slumlords in Los Angeles" and filed an unusual lawsuit Wednesday asking a judge to fine the company hundreds of millions of dollars and issue an injunction forcing it to clean up the foreclosed properties it owns in Los Angeles, which have numbered 2,000 over the last four years.
After a yearlong investigation, city officials claimed in court papers that Deutsche Bank has illegally evicted tenants, shut off their water and power and then let hundreds of properties turn into graffiti-scarred dens for squatters, gang members and other criminals, destroying quality of life and driving up crime in the process.
They say the bank, which invested heavily in mortgage-backed securities, found itself "transformed ... from detached investment brokers ... to large-scale residential property owners, a role whose responsibilities ... they have completely eschewed."
If successful, city officials said, the suit would be the first of its kind in the U.S. in which a city was able to collect penalties and restitution from banks for the havoc that foreclosures have wrought.
Other cities have faced similar frustrations.
In 2008, the city of Cleveland sued Deutsche Bank and other financial institutions alleging that subprime mortgage lending practices had resulted in widespread foreclosures and blight. A judge dismissed the suit.
In Milwaukee, meanwhile, community groups, with the backing of Alderman Michael Murphy, traveled to Frankfurt, Germany, and spoke at a Deutsche Bank shareholder meeting, complaining of the "terrible condition" of Deutsche-owned properties in that city.
Los Angeles' legal action comes a day after the federal government filed a fraud lawsuit against Deutsche Bank accusing the firm of recklessly approving mortgages "in blatant disregard" of whether borrowers could make the required monthly payments. The government is seeking more than $1 billion in that suit.