NCUA announced that it has filed two lawsuits against securities firms alleging violations of federal and state securities laws and misrepresentations in the sale of hundreds of securities. The suits filed are against J.P. Morgan Securities, LLC, and RBS Securities, Inc.
"NCUA has a responsibility to do everything in our power to seek maximum recoveries from those involved in the issuing, underwriting and sale of the faulty securities that resulted in the failures of five of the largest wholesale credit unions," said NCUA Board Chairman Debbie Matz in the press release.
The agency, which says additional lawsuits may follow in order to seek recoveries, alleges losses are from the purchase of securities that caused the failures of five large corporate credit unions.
Chairman Matz also said, "NCUA's legal actions are based on ongoing investigations of individuals and entities responsible for selling these securities to the failed institutions. By these actions we intend to hold responsible parties accountable. The first two actions involve damages in excess of $800 million. We expect to file additional actions and seek a total amount of damages in the billions of dollars. Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions."
Any recoveries from these legal actions would reduce the total losses resulting from the failure of the five corporate credit unions. Losses from those failures must be paid from the Temporary Corporate Credit Union Stabilization Fund or the National Credit Union Share Insurance Fund. Expenditures from these funds must be repaid through assessments against all federally insured credit unions. Thus, any recoveries would help to reduce the amount of future assessments on credit unions.
To obtain copies of the complaints and to read NCUA's press release in full click on the links below:
Press release: http://www.ncua.gov/news/press_releases/2011/MR11-0620NCUASues.pdf
J. P. Morgan Complaint: http://www.ncua.gov/news/press_releases/2011/MR11-0620JPMComplaint.pdf
RBS Complaint: http://www.ncua.gov/news/press_releases/2011/MR11-0620RBSComplaint.pdf