The NCUA’s pursuit for damages against investment bankers that sold losing investments to failed corporates has been dealt another blow.
On Friday, Los Angeles-based U.S. District Court Judge George Wu dismissed the regulator’s claims against Goldman Sachs.
Like a similar NCUA suit against Barclays Capital and Credit Suisse that was dismissed July 10 in Kansas City, Kan., Wu agreed with Goldman attorneys that the NCUA’s claims were time barred, meaning the regulator did not file the suit in time.
However, Wu – the same federal judge who presided over the NCUA’s suits against Western Corporate FCU executives – did approve the NCUA’s request for an appeal on the time-barred issue, saying the issue has “generated a substantial degree of disagreement” and was material to the case.
NCUA Public Affairs Specialist John Fairbanks said the regulator is reviewing Friday’s decision in Los Angeles, including the option to appeal, and following the review will determine the appropriate course of action.
“NCUA has substantial claims against Goldman Sachs and other companies who sold faulty securities to the corporate credit unions, and the agency will vigorously pursue those claims,” he said.
In both suits, the NCUA alleged that the investment banks committed securities fraud by misleading WesCorp in California and U.S. Central FCU in Kansas regarding the potential for losses, and additionally “systematically abandoned” underwriting standards for the mortgage backed securities. Losses on the investments led to the failure of both corporates in March 2009.
Despite the setback on the federal claims, state-based claims have not been dismissed in the Goldman Sachs case. And while all claims in Kansas against Barclays were dismissed, eight out of the original 20 claims the NCUA filed against Credit Suisse are still active.
In April, the NCUA settled claims against Bank of America for $165 million. After legal fees are paid, the funds will be applied toward corporate stabilization costs which are currently being paid by federally insured credit unions in the form of annual assessments.