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Virginia reaches $63 million settlement with 11 banks for RMBS fraud

RBS, Barclays, others accused of defrauding state’s retirement system

The Commonwealth of Virginia announced Friday that it reached a “record” settlement with 11 banks over allegations that the banks defrauded the state’s retirement system by allegedly misrepresenting the quality of residential mortgage-backed securities in the run-up to the financial crisis.

According to the office of Virginia Attorney General Mark Herring, the $63 million settlement is the largest non-healthcare-related recovery ever obtained in a suit alleging violations of the Virginia Fraud Against Taxpayers Act.

Herring’s office said that the settlement resolves all claims against the 11 banks that were accused of “harming” the Virginia Retirement System, Virginia’s taxpayers, and the pensioners of Commonwealth through “misrepresentation” of the quality of mortgage bonds sold to the VRS.

According to Herring’s office, the banks did not admit liability, and Virginia has dismissed the claims against the defendants with prejudice, in exchange for settlements of the following amounts:

  • Countrywide Securities Corporation and Merrill Lynch, Pierce, Fenner & Smith, Inc. (combined): $19,500,000
  • RBS Securities: $10,000,000
  • Barclays Capital: $9,000,000
  • Morgan Stanley & Co.: $6,900,000
  • Deutsche Bank Securities: $5,621,897
  • Citigroup Global Markets: $4,750,000
  • Goldman, Sachs & Co.: $2,900,000
  • HSBC Securities: $2,500,000
  • Credit Suisse Securities: $1,200,000
  • UBS Securities: $850,000

According to Herring’s office, Virginia initially sought to recover $383 million in alleged damages, including $250.66 million of realized losses.

"This case breaks new ground for Virginia, recovering millions for Virginia taxpayers from banks that we alleged had misrepresented the products they sold to the Commonwealth," Herring said. "Today's settlement, which represents significant relief to VRS, taxpayers and pensioners of the Commonwealth, is one of the largest of its kind in the nation."

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