NCUA claims Goldman Sachs misrepresented securities risks
Regulators allege Goldman Sachs & Co. violated federal and state securities laws by misrepresenting the risks of securities sold to two failed corporate credit unions. In a lawsuit filed in U.S. District Court for the Central District of California Tuesday, the National Credit Union Administration seeks damages of more than $491 million. It's the fourth action the NCUA has filed against investment banks as it seeks to recover losses suffered by five failed corporate credit unions. Such institutions provide wholesale services to retail credit unions. NCUA charges the sellers and underwriters of certain mortgage-backed securities downplayed the risks associated with the investments sold to the Central and Western Corporate federal credit unions. Those investments suffered "dramatic, unprecedented declines in value, effectively rendering five corporate [credit unions] insolvent," the NCUA said. Goldman Sachs did not immediately return a call seeking comment. "By these actions we intend to hold responsible parties accountable," NCUA Chairman Debbie Matz said in a statement. "Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions." In July, the NCUA sued RBS Securities Inc. seeking more than $629 million in damages. That action followed two lawsuits filed in June against J.P. Morgan Securities and RBS. The latest action brings the total amount of damages NCUA seeks to recover to almost $2 billion. The federal regulator expects to file an additional one to six lawsuits as part of its efforts to recover losses by corporate credit unions. Write to Liz Enochs.