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Credit Suisse must face $10bn mortgage-fraud lawsuit

  

dawn.com | December 28, 2014

NEW YORK: Credit Suisse Group has been ordered to face a $10 billion lawsuit by New York’s attorney general accusing the Swiss bank of fraud in the sales of mortgage-backed securities before the 2008 financial crisis.

A New York State Supreme Court justice rejected the bank’s request to dismiss the case, a move that gives leverage to Attorney General Eric Schneiderman to demand internal bank documents and force a settlement. New York demonstrated the bank may have engaged in misconduct, Justice Marcy Friedman said in a Dec 24 decision, allowing the suit to head toward trial.

In addition to forcing Zurich-based Credit Suisse to defend itself or settle, the ruling may strengthen Schneiderman’s hand in punishing other banks for bad behaviour tied to the recession.

Elizabeth DeBold, a spokeswoman for Schneiderman, said the lawsuit is part of an effort to pursue “accountability for those who contributed to the near collapse of our economy.” Drew Benson, a spokesman for Credit Suisse, said yesterday in an e-mail that the bank will appeal the ruling.

New York sued Credit Suisse in November 2012, claiming Switzerland’s second-largest bank misrepresented the risks of investing in mortgage-backed securities. Last year, the bank argued that New York missed a three-year deadline for suing. The state countered that it had six years to file its complaint.

If the bank had won, Schneiderman would have faced a new roadblock as he considers similar multibillion-dollar claims against Wall Street firms.

Armed with the Martin Act, New York’s powerful anti-fraud statute, Schneiderman has pursued banks while introducing programmes to relieve struggling homeowners and stem a rise in foreclosures.

He claimed Credit Suisse knew about “pervasive flaws” in the screening of residential loans underlying mortgage securities it sold, but assured investors they were safe because it wanted to expand its business.

Under the Martin Act, “false promises” by sellers of securities are against the law.

JPMorgan Chase, also sued by Schneiderman’s office, agreed to settle that case along with federal claims over mortgage-backed securities in a landmark $13bn accord last year. The state got $613 million in the settlement, the first in a string of payouts it has received in legal agreements over the financial instruments.

In July, Citigroup agreed to pay $7bn in fines and consumer relief to resolve claims by the federal government and states including New York. The following month, Bank of America agreed to pay about $17bn, including almost $10bn in cash, to resolve civil investigations by federal and state prosecutors, including Schneiderman.

In New York’s suit against Credit Suisse, Schneiderman claimed the bank ignored warning signs about the quality of loans it was packaging and selling. One example cited was its use of New Century Financial Corp. mortgages after that firm’s 2007 bankruptcy.

By arrangement with Washington Post-Bloomberg News Service

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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