What exactly caused the subprime mortgage meltdown? Was it triggered by mortgage defaults driven by market conditions, such as rising interest rates, and therefore unavoidable?

Or was it the result of mismanagement that permitted lax or predatory lending policies or even outright fraud?

More to the point: If your pension plan bought securitized debt obligations, whom can you blame? And what might be an appropriate legal recourse?

Grant & Eisenhofer, one of the country's biggest class-action law firms, is seeking to supply some of the answers to these questions. Recently, it held an informational seminar for fiduciaries and institutional investors who might be holding mortgage-backed securities such as collateralized debt obligations (CDOs). The seminar, according to the G&E press release, promised to be "one of the first programs designed to show investors how to take up arms."

What was the advice that G&E dished out to this gathering of corporate finance executives?

As a professional finance officer, it's going to be hard to sue the broker/dealer you bought the credit instruments from on the argument that hey, you were misled, said Jay Eisenhofer, a founder and managing partner of G&E and lead counsel in many securities class-action cases (including Tyco).

This is because CDOs are sold as SEC Rule 144A offerings, unregistered securities that come "with a host of disclosures," said Eisenhofer. To be able to buy such securities, you must be a "qualified institutional buyer," or QIB -- in short, a sophisticated investor. There are, therefore, "significant obstacles" to winning cases against CDO broker/dealers, he pointed out.

Yet there have been 25 to 30 cases against dealers claiming variations of misrepresentation, Eisenhofer said, "with mixed success." Such cases basically charge dealers with violating SEC Rule 10b-5, which prohibits broker/dealers from lying, cheating, or even omitting important material information in the sale of a security.

Eisenhofer, who was one of seven presenters in the panel discussion in midtown Manhattan, said that in addition to targeting rating agencies for rating manipulation, investors could name the senior executives of the broker/dealers and charge them with violating Rule 10b-5. Such accusations might include lack of disclosure of the assets in the instruments, willfully misrepresenting the value of the securities, and/or breach of fiduciary or contractual duty.

For example, the Lone Star Fund, a hedge fund, is suing Barclays Bank in Dallas because Lone Star alleges that Barclays falsely represented that none of the mortgage loans underlying the BR2 and BR3 securities it bought from Barclays was delinquent or ever had been delinquent, according to Eisenhofer's presentation.

Similarly, Plumbers' Union Local No. 12 is suing Nomura Asset Acceptance Corp, Merrill Lynch, UBS, Citigroup, and Goldman Sachs in Superior Court in Massachusetts, alleging that the offering documents failed to disclose that the loan originators had become lax in their lending standards.

Indeed, Eisenhofer said that lenders pressured real estate appraisers to inflate property values. (This is the basis of New York Attorney General Andrew Cuomo's civil complaint against appraiser First American Corporation and Washington Mutual.)

There is plenty of blame to go around. "Rating agencies were at the center of this," he said, stating that fees from rating CDOs drove revenue into agencies such as Moody's and Standard & Poor's. S&P grossed about $3 billion in fees from subprime investment vehicles alone, said Eisenhofer.