ALEXANDRIA, Va. – NCUA yesterday filed its seventh lawsuit against Wall Street investment firms over investment losses that contributed to the failure of U.S. Central and Western Corporate.
NCUA's suit alleges Barclay's Capital, Ice. violated federal and state securities laws through misrepresentations made in the sale of mortgage-backed securities to U.S. Central and WesCorp. Barclay's is the U.S. subsidiary of the British financial services firm.
NCUA alleges that the price paid for the securities sold by Barclay's exceeded $55 million.
"Trust and accountability are two cornerstones of our financial system," said NCUA Chairman Debbie Matz in an NCUA press release. "As clearly outlined in our complaint, Barclay's violated that trust by issuing faulty disclosures on securities underwritten by the firm. As a result, two corporate credit unions collapsed, and the entire credit union industry experienced a crisis.
"Since then, NCUA has successfully worked to restore stability to the credit union system. Now we are working to hold Barclay's, and other responsible parties, accountable for their actions," she added.
As in the other six lawsuits, NCUA's complaint alleges Barclay's made numerous misrepresentations and omissions of material facts in the offering documents of the securities sold to the failed corporates. It also alleges systemic disregard of the underwriting guidelines stated in the offering documents. The misrepresentations caused U.S. Central and WesCorp to believe the risk of loss was minimal, when in fact the risk was substantial.
NCUA has filed lawsuits against J.P. Morgan Securities LLC, RBS Securities, Goldman Sachs, Wachovia, and UBS Securities. The cases are working their way through court.