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L.A. says Deutsche Bank among city’s largest slumlords, files suit seeking hundreds of millions of dollars [Updated]

May 4, 2011 |  9:02 am

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.

Deutsche-bank03 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.

[Updated at 10:34 a.m.: “The Los Angeles city attorney’s office has filed this lawsuit against the wrong party," Deutsche Bank spokesman John Gallagher said in a statement. "As we have repeatedly advised the Los Angeles city attorney’s office, loan servicers, and not Deutsche Bank as trustee, are contractually responsible for both the maintenance of foreclosed properties and any actions taken with respect to tenants of foreclosed properties.

"For over a year, we have offered to help the Los Angeles city attorney's office contact the loan servicers that are responsible for maintaining the properties in question," he continued, "but they have refused our help and would not even tell us which properties they were talking about.”]

City officials 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.


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Photos, from top: City Attorney Carmen Trutanich, from left, and City Council members Dennis Zine, Eric Garcetti and Janice Hahn gather around a map marking 2,000 properties owned by Deutsche Bank after a news conference at City Hall; an eviction notice is attached to a broken window of one of Deutsche Bank's empty properties in the 800 block of West 83rd Street in South Los Angeles. Credit: Francine Orr / Los Angeles Times