Money News reports, Credit Suisse Group AG was ordered to face a lawsuit by New York's Attorney General (AG), accusing the bank of fraud in sales of mortgage-backed securities before the recession.
A New York State Supreme Court judge rejected the bank's request to dismiss the lawsuit, which demands as much as $10 billion in damages. Attorney General Eric Schneiderman's (AG) suit was valid, and he demonstrated the bank may have engaged in misconduct, Judge Marcy Friedman said in the decision. The ruling may strengthen Sc hand in punishing other banks in the future over liability for the financial crisis.
"We will appeal this particular decision and continue to defend ourselves in this case," Drew Benson, a spokesman for Zurich-based Credit Suisse, said in an email. Schneiderman sued Credit Suisse in November 2012, claiming Switzerland's second largest bank misrepresented the risks of investing in mortgage-backed securities. Last year, the bank argued in a court hearing in Manhattan that New York missed a 3 year deadline for suing. The state countered that it had 6 years to file it's complaint. If the bank had won, Schneiderman would have faced a new roadblock as he considers similar multibillion-dollar claims against other Wall Street firms.
Armed with the Martin Act, New York's powerful anti fraud tool, the AG has sought to pursue those caims, while introducing programs to provide relief for struggling homeowners and stem the rise in foreclosures. Under the Martin Act, "false promises" by sellers of securities are a violation.
JPMorgan Chase & Co., also sued by the AG's office, agreed to settle that case along with federal claims over mortgage-backed securities in a landmark $13 billion accord last year. The state got $613 million in the settlement, the first in a string of payouts it has received in legal agreements over the financial instruments. In July, Citigroup Inc. agreed to pay $7 billion in fines and consumer relief to resolve claims by the federal government and states including New York. The following month, Bank of America Corp. agreed to pay about $17 billion, including almost $10 billion in cash, to resolve civil investigations by federal and state prosecutors, including the AG office.
In New York's lawsuit against Credit Suisse, the AG claimed the bank ignored warning signs about the quality of loans it was packaging and selling. One example cited was its use of New Century Financial Corp. mortgages after that firm's 2007 bankruptcy.
This article, originally printed in Money News Friday Dec 26, 2014 08:49 AM. http://www.moneynews.com/Personal-Finance/Credit-Suisse-New-York-Mortgage-Fraud-Claims/2014/12/26/id/615014/