Credit union agency files largest suit to date against Wall Street firms

[JURIST] The National Credit Union Administration (NCUA) [official website] filed suit [complaint, PDF] on Monday against against Bear, Stearns & Company, now acquired by JPMorgan Securities [corporate website]. The NCUA brought suit acting in its capacity as Liquidating Agent of multiple credit unions: US Credit, Western Corporate, Southwest Corporate and Members United Corporate. Defendants, as underwriters, sellers and/or issuers of certain residential mortgage-backed securities, allegedly violated federal and state laws in the sale of $3.6 billion of these securities by offering untrue statements, misrepresenting and omitting material facts. This suit is the largest the agency has filed to date and claims the misrepresentations caused the credit unions to believe there was a minimal risk of loss. NCUA Board Chairman Debbie Matz stated [press release]:

Bear, Stearns was one of several Wall Street firms that sold faulty securities to corporate credit unions, leading to their collapse and enormous losses across the industry. Firms like Bear, Stearns acted unfairly by ignoring the rules for underwriting. They packaged these securities and then told buyers the paper was sound. When the securities plunged in value, we learned the truth. NCUA is now working to hold these underwriters accountable and secure recoveries on behalf of federally insured credit unions. ... NCUA and credit unions have successfully worked together to restore stability to the credit union system. Now we are holding responsible parties like Bear, Stearns accountable for their actions. It’s the right thing to do.
The NCUA has a statutory duty to seek recovery from responsible parties and has eight similar actions pending against firms like Bear Stearns.

These firms have faced numerous lawsuits regarding their business practices. In July JPMorgan agreed to a $100 million settlement [JURIST report] in a suit brought by customers claiming unreasonable fees and a three percent increase on monthly minimum payments by credit card holders. In early June the firm was granted [JURIST report] permission to pay $44.6 million to resolve allegations of fraudulent bidding practices for state and local government investment securities at taxpayers' expense. The settlement followed JPMorgan's agreement [JURIST report] last July with the US Department of Justice [official website] to pay $228 million to federal and state authorities. One month earlier JPMorgan again settled [JURIST report] at $153.6 million for fraud charges brought by the SEC for misleading investors during the housing crises. In July 2010 Goldman Sachs [corporate website] agreed to a $550 million settlement [JURIST report] with the SEC to resolve similar charges.

 

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