NCUA Using Outside Counsel for Suits Against Securities Firms
The NCUA has hired three outside law firms to represent it in the lawsuits it filed Monday that seek more than $800 million from RBS Securities Inc. and J.P. Morgan Securities.
The agency, which is alleging that the investment banks gave incomplete and misleading information to corporate credit unions when selling them residential mortgage backed securities, has retained two law firms with expertise in such litigation: Washington-based Kellogg, Huber, Hansen, Todd, Evans & Figel and Chicago-based Korein Tillery.
The agency has also retained Stueve Siegel Hansen as local counsel in Kansas City, where the suits were filed.
Asked about the costs of the litigation, NCUA spokesman David Small wrote in an email that “we are confident that this litigation is worth pursuing. It would be inappropriate to discuss legal fees or speculate about what they might be at this point in the process.’’
Steven Bisker, an attorney who has worked extensively on credit union issues, said the substance of the NCUA’s allegations appears to be solid but there may be a question of the statute of limitations, since some of the transactions go back to 2005.
He also said that the case could come down to a question of how much due diligence the bond issuers, RBS Securities and J.P. Morgan, have to do and actually did on the mortgages that they didn’t underwrite.
Banking industry analyst Bert Ely said its unclear how the NCUA’s allegations against RBS Securities, a unit of the Royal Bank of Scotland, and J.P. Morgan Securities will hold up in court or whether the investment banks will feel pressured to settle with the agency.
Ely said the NCUA could lose the case if it is proven in court that the executives at the corporates didn’t perform the appropriate due diligence.
“The old rule is you don’t buy what you don’t understand, don’t believe everything a salesman tells you, and don’t whine if you take a loss,” he said.