Doug Samuels, president/CEO of Space Coast Credit Union,acknowledged that its mortgage securities suit against several WallStreet giants may be an arduous undertaking but the financialinstitution is ready to fight on behalf of its members.

“This may not be an easy battle,” Samuels wrote in a statement.“However, we strongly believe that these large brokers should beheld accountable when they take advantage of locally owned, smallerfinancial institutions.”

The $3 billion Space Coast in Melbourne, Fla., recently filed suit againstMerrill Lynch, Wachovia Capital, Barclays Capital, Lehman Brothers'Richard Fuld, and the major U.S. credit rating agencies Standard& Poor's and Moody's alleging that the defendants caused morethan $100 million in losses to Eastern Financial Florida CreditUnion.

Space Coast acquired Eastern Financial in 2009. Samuels said theacquired credit union sustained losses from 2008 to 2010. In largepart, those losses resulted in the collapse of Eastern Financialand the loss of its independent strength thereby creating the needfor a merger partner, Samuels said.

“It is our duty, on behalf of our members, to attempt to recoverthe loss and ultimate destruction of Eastern resulting from thissale of the mortgage-related securities,” Samuels said. “Thesemega-brokers knew at the time of sale that these securities wereworth less than face value and took advantage of a lesssophisticated buyer.”

Sam Rudman, an attorney representing Space Coast, said there isstrong evidence to support the credit union's claims.

Space Coast's complaint identifies several ways that thedefendants allegedly manipulated the credit ratings includingmaking out-of-model or manual adjustments to the rating agencies'credit rating models to obtain better ratings for themortgage-related securities at issue in the case.

Space Coast said the defendants allegedly knew that the creditrating models rested on fraudulent data due to the fact that theinvestment banks waive defective loans allowing them to be includedin the mortgage securities.

“The defendants never accounted for these defective loans whenthey built and sold the so-called investment grade mortgage bonds,”according to Space Coast. “Moreover, the suit alleges that all ofthe ratings that defendants used to sell the securities were gradedon a curve because the investment banks paid the credit ratingagencies more to rate mortgage-related securities than they paidthe rating agencies to rate other, less lucrative securities suchas government-issued debt.”

“Wall Street cannot create toxic securities, package them forsale as investment grade, and then expect buy-side investors to sitback and do nothing when their portfolios crash,” said Rudman, apartner with Robbins Geller Rudman and Dowd LLP, a securitieslitigation law firm.