The National Credit Union Administration has filed suit in California against Goldman Sach alleging violations of US federal and state securities laws, as well as misrepresentations in the sale of securities to now-failed U.S. Central and Western Corporate federal credit unions.
'NCUA continues to carry out our responsibility to do everything reasonable in our power to seek maximum recoveries', said NCUA Board Chairman Debbie Matz. 'By these actions we intend to hold responsible parties accountable. Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions'.
As liquidating agent for the failed corporate credit unions, NCUA has a statutory duty to seek recoveries from responsible parties to minimize cost to its insurance funds and the credit union industry.
This action seeks damages in excess of $491m from Goldman Sachs, bringing the total sought in the four lawsuits filed to date to nearly $2bn.
NCUA’s new suit against Goldman Sachs claims the sellers and underwriters of the questionable securities made numerous material misrepresentations in the offering documents. These misrepresentations caused the corporate credit unions to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial.
The mortgage-backed securities experienced dramatic, unprecedented declines in value, effectively rendering five corporates insolvent. The combined suits are the culmination of lengthy investigations into the circumstances surrounding the purchases of these securities.
This law suit follows three similar legal proceedings, two filed in the Federal District Court of Kansas June 20 against J.P. Morgan Securities, LLC, and RBS Securities, and one in the Federal District Court in Central California also against RBS July 18.
Anticipating a total of five to10 actions, additional lawsuits may follow in order to recover losses from the purchase of securities that caused the failures of five, large wholesale credit unions.
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