The $3 billion Space Coast Credit Union recently filed suit against Merrill Lynch, Wachovia Capital, Barclays Capital, Lehman Brothers' former CEO Richard Fuld and major U.S. credit rating agencies, Standard & Poor's and Moody's, alleging that the defendants caused more than $100 million in losses to Eastern Financial Florida Credit Union.
Space Coast in Melbourne, Fla., acquired the financially troubled Eastern Financial in 2009 after it was placed in conservatorship by the NCUA and issued a cease and desist order for questionable loan practices. In large part, the mortgage securities' losses resulted in the collapse of Eastern Financial and the loss of its independent strength, creating the need for a merger partner, said Space Coast President/CEO Doug Samuels.
The complaint, filed Feb. 6 in a Florida state court, alleges that the named investment banks and the rating agencies conspired to inflate allegedly toxic bonds into investment grade securities using alleged fraudulent credit ratings and that the investment banks allegedly dumped those inflated securities onto unsuspecting investors.
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