NCUA Sues RBS Securities for $685 Million Over Failed WesCorp
The NCUA on Monday filed a lawsuit seeking $685 million in damages from RBS Securities for mortgage-backed securities it sold to Western Corporate FCU.
It’s the third lawsuit filed by the NCUA stemming from the collapse of five corporate credit unions and the second against RBS. The agency said Monday it plans to file between five and 10 lawsuits.
The suit filed in federal court in Los Angeles alleges that the sellers and underwriters of the questionable securities made numerous material misrepresentations in the offering documents. These misrepresentations caused WesCorp to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial.
“NCUA continues to carry out our responsibility to do everything reasonable in our power to seek maximum recoveries,” NCUA Chairman Debbie Matz said in a statement. “By these actions we intend to hold responsible parties accountable.’’
The previous lawsuit against RBS Securities seeks $565 million in damages and a lawsuit filed against J.P. Morgan Securities seeks $278 million in damages. Both those lawsuits were filed on June 20.
The collapse of five corporate credit unions caused the agency to design and implement a rescue plan that it estimates could cost credit unions approximately $20 billion. It involved borrowing money from the Treasury Department to set up the Temporary Corporate Credit Union Stabilization Fund.
Natural person credit unions are paying for the rescue through assessments that are scheduled to continue through 2020. For this year, the agency has recommended that credit unions set aside between 20 and 25 basis points for 2011 assessments.