Virginia Attorney General Mark Herring announced a giant lawsuit against some of the largest commercial banks for fraud committed against Virginia taxpayers during the height of the financial crisis.
On Tuesday, the Richmond Circuit Court announced it is seeking $1.15 billion in damages against 13 banks that are each accused of fraudulently misleading the Virginia Retirement System during the sale of residential mortgage-backed securities to the state retirement fund.
Virginia lost $383 million and was forced to sell the vast majority of these toxic securities built on junk mortgages since banks purposefully included high-risk mortgages in securities and fraudulently misrepresented the quality of those loans to rating agencies.
The securities were purchased starting around 2004, and before 2010.
This is the largest financial fraud action ever brought by the Commonwealth of Virginia and is the largest case ever brought under the Virginia Fraud Against Taxpayers Act.
In addition, the Commonwealth will also seek civil penalties against each bank in the amount of $5,500-$11,000 for each violation.
The named banks are:
- Barclays Capital
- Citigroup Global Markets
- Countrywide Securities Corporation
- Credit Suisse Securities (USA)
- Deutsche Bank Securities
- Goldman, Sachs & Co.
- RBS Securities
- HSBC Securities (USA)
- Morgan Stanley & Co.
- UBS Securities
- WAMU Capital
- J.P. Morgan Securities (and as current owner of Bear, Stearns & Co.)
- Merrill Lynch, Pierce, Fenner & Smith Incorporated (and as current owner of Banc of America Securities)
"Every Virginian was harmed by the financial crisis. Homes were lost, retirement accounts were devastated, small businesses saw their credit dry up almost overnight, and state and federal budget cuts hurt vulnerable Virginians,” said Herring.
“It will take many more years to recover the economic strength and stability we lost, but I will not allow Virginians to be left holding the bag for the reckless, fraudulent business practices of a few big banks who thought they were above the law. These banks lied to Virginia, and taxpayers and state employees lost hundreds of millions of dollars as a result," Herring continued.