US Sues UBS over Mort­gage Fraud

Law­suit filed af­ter bank re­jects govt pro­posal to set­tle for nearly $2 bil­lion

The Economic Times - - Around The World - Karen Freifeld & Jonathan Stem­pel

New York: The US gov­ern­ment on Thurs­day filed a civil fraud law­suit ac­cus­ing UBS Group, Switzer­land’s largest bank, of de­fraud­ing in­vestors in its sale of res­i­den­tial mort­gage-backed se­cu­ri­ties lead­ing up to the 2008-09 global fi­nan­cial cri­sis. UBS was ac­cused of mis­lead­ing in­vestors about the qual­ity of more than $41 bil­lion of sub­prime and other risky mort­gage loans back­ing 40 se­cu­ri­ties of­fer­ings in 2006 and 2007, the De­part­ment of Jus­tice said in a com­plaint filed with the fed­eral court in Brook­lyn. The law­suit came af­ter UBS re- jected a gov­ern­ment pro­posal that it pay nearly $2 bil­lion to set­tle, ac­cord­ing to a per­son fa­mil­iar with the talks. While UBS was not a big orig­i­na­tor of US res­i­den­tial home loans, US at­tor­ney Richard Donoghue in Brook­lyn said in­vestors suf­fered “cat­a­strophic losses” from the bank’s fail­ure to fully dis­close the risks of mort­gage se­cu­ri­ties it helped sell. A UBS spokesman and a Jus­tice De­part­ment spokes­woman de­clined to com­ment on the set­tle­ment talks, but the bank said it will fight the law­suit. “The DOJ’s claims are not sup­ported by the facts or the law,” it said in a state­ment. “UBS is con­fi­dent in its le­gal po­si­tion and has been fully pre­pared for some time to de­fend it­self in court.”

US of­fi­cials are seek­ing un­spec­i­fied fines against UBS un­der a fed­eral law al­low­ing it to pur­sue penal­ties up to the amounts the bank gained or oth­ers lost from al­leged mis­con­duct.

The case is one of the last add r e s si ng a l lege d mis­con­duct in the pool­ing and sale by large banks of mort­gage se­cu­ri­ties that were a ma­jor cause of the fi­nan­cial cri­sis. Bank of Amer­ica, Bar­clays, Cit­i­group, Credit Suisse Group, Deutsche Bank, Gold­man Sachs, HSBC Hold­ings, JPMor­gan Chase, Mor­gan Stan­ley and Royal Bank of Scot­land pre­vi­ously set­tled.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.