Sept. 26, 2012 – NCUA announced Tuesday that it is suing Barclay’s Capital Inc. for violating federal and state securities laws in the run up to the failure of U.S. Central FCU and Western Corporate FCU.
In the suit, NCUA claims that Barclay’s broke federal and state securities laws by misrepresenting the sale of mortgage-backed securities to the two corporate credit unions. NCUA is arguing that Barclay’s made numerous misrepresentations and omissions of material facts in the offering documents of the securities that were sold. U.S. Central and WesCorp paid over $555 million for the securities.
The suit also alleges systemic disregard of the underwriting guidelines stated in the offering documents. These misrepresentations caused US Central and WesCorp to believe the risk of loss was minimal when, in fact, the risk was substantial, according to NCUA.
In announcing the suit, NCUA Chairman Debbie Matz said “trust and accountability are two cornerstones of our financial system” and that Barclay’s “violated that trust by issuing faulty disclosures on securities underwritten by the firm.”
The suit is the seventh NCUA has filed against a large investment firm to recoup losses relating to the sale of mortgage-backed securities. NCUA has already settled claims worth more than $170 million with Citigroup, Deutsche Bank Securities and HSBC, making it the first federal regulatory agency for depository institutions to recover losses from such investments.
NAFCU has long urged NCUA to pursue all legal means necessary against responsible parties to recoup losses associated with corporate stabilization.
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