On October 19, 2015, Barclays PLC and Wachovia Capital Markets LLC agreed to pay $325 million and $53 million, respectively, to settle claims brought by the National Credit Union Administration Board (NCUA), as liquidating agent of five credit unions, regarding residential mortgage backed securities purchased by those credit unions. NCUA alleged in the actions (filed in New York, California, and Kansas federal courts) that the characteristics of the RMBS and the underlying loans were misrepresented in the offering documents. NCUA Press Release on Barclays. NCUA Press Release on Wachovia. We previously covered two of NCUA’s actions against Wachovia here and here.
Wachovia
Federal Court Allows RMBS Case Against RBS Securities and Wachovia Capital Markets to Proceed
On July 25, Judge Richard D. Rogers of the United States District Court for the District of Kansas denied defendants’ motion to dismiss the National Credit Union Administration Board’s suits against RBS Securities and Wachovia Capital Markets. The two consolidated actions allege violations of Sections 11 and 12(a)(2) of the federal Securities Act of 1933, as well as violations of the Kansas Uniform Securities Act, in connection with the sale of residential mortgage-backed securities. The court concluded that plaintiffs’ claims were not barred by the applicable statutes of limitations or repose. The court also denied in large part defendants’ motion to the extent that it was based on failure to state a claim, but granted defendants’ motion to dismiss as to plaintiffs’ allegations of systematic disregard of underwriting guidelines as to certain certificates for which plaintiffs failed to identify specific originators or underwriting practices, as well as plaintiffs’ allegations that defendants had misrepresented the benefits of the credit enhancement associated with the certificates at issue. Decision.
NCUA Sues Wachovia Over Credit Unions’ RMBS Investments
On November 28, 2011, the National Credit Union Administration (“NCUA”), an independent federal agency that supervises and charters federal credit unions, filed a complaint in the federal district court for the District of Kansas against Wachovia Capital Markets LLC. NCUA is suing in its capacity as the liquidating agent of two failed credit unions, U.S. Central Federal Credit Union (“U.S. Central”) and Western Corporate Federal Credit Union (“WesCorp”). NCUA seeks approximately $200 million in damages based on alleged untrue statements and omissions in the offering documents for 5 RMBS purchased by U.S. Central and WesCorp. NCUA asserts causes of action under Sections 11 and 12(a)(2) of the federal Securities Act, as well as violations of the California and Kansas securities laws. Complaint.
S.D.N.Y. Grants in Part and Denies in Part Motion to Dismiss Multiple Actions Against Wachovia
In re Wachovia Equity Sec. Litig., No. 09 Civ. 4473 (S.D.N.Y. Mar. 31, 2011) (Sullivan, J.)
Investors in equity and debt securities of Wachovia brought four related actions against Wachovia and several related entities and individuals, Wachovia’s underwriters and its auditors alleging claims under Section 10(b) of the ’34 Act, and Rule 10b-5 thereunder, and Sections 11, 12(a)(2), and 15 of the ’33 Act. In considering four complaints and seven motions to dismiss, the court granted in part and denied in part the motions. The court found that the Section 10(b) claims, which included allegations of fraudulent concealment of the true value of Wachovia’s CDO holdings, failed for insufficient allegations of scienter. The court also found that: (1) plaintiffs cannot assert claims based on offerings they did not purchase; (2) tolling of the ’33 Act’s one-year statute of limitations was appropriate due to a pending class action; (3) allegations of misstatements of loan-to-value ratios in Wachovia’s mortgage lending portfolio were sufficient; and (4) the Section 11 claim against Wachovia’s auditor survives because a due diligence defense cannot be evaluated on a motion to dismiss. Decision.