Articles Posted in Banking Fraud

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Bank of America is in talks to settle an investigation into its role in the sale of mortgage-backed securities before the 2008 financial crisis and could pay between $16 and $17 billion, making it the biggest Justice Department settlement by a long shot arising from the economic collapse. However, the deal has not been finalized, and although the two sides have reach an agreement in principle sources say talks could still break down. Under the tentative deal, the bank would pay about $9 billion in cash. The remainder would go toward consumer relief.

The deal would be the most recent stemming from the sale of toxic mortgage securities leading up to the recession. The Justice Department last year reached a $13 billion settlement with JPMorgan and in July announced a $7 billion settlement with Citigroup.

Leading up to the financial crisis, banks downplayed the risks of subprime mortgages when packaging and selling the securities to mutual funds, investment trusts and pensions, as well as other banks and investors. The securities contained residential mortgages from borrowers who were unlikely to be able to repay their loans, yet were publicly promoted as relatively safe investments until the housing market collapsed and investors suffered billions of dollars in losses. Those losses triggered a financial crisis that pushed the economy into the worst recession since the 1930s.

Bank of America had previously argued that it should not be held liable for the subprime mortgages issued by Countrywide and Merrill Lynch, two troubled firms the bank acquired in 2008 as the meltdown took hold. Combined, those three firms issued $965 billion in mortgage-backed securities from 2004 to 2008. Almost 75 percent of that total came from Countrywide.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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UBS AG is being formally investigated for money laundering by French officials, who ordered the bank to post €1.1 billion ($1.49 billion) bail amidst a growing investigation into claims that it assisted high-profile clients evade French taxes. Just a month ago, UBS’ French subsidiary was fined a record-setting €10 million for being slow to correct poor oversight procedures that permitted employees to help clients dodge tax liabilities. In late June, French regulator Autorite de Controle Prudentiel (ACP) said the $13 million UBS France fine was the largest allowed under the country’s law. That fine came just weeks after the Swiss bank was placed under a separate formal investigation for their alleged tax evasion assistance.

ACP claims that it first warned UBS of its “grave concerns” in 2007, but the bank waited more than 18 months before it enacted additional controls and corrected the questionable procedures. UBS France’s controls failed to prevent its employees from sharing data that could identify customers who might set up offshore accounts to evade French taxes with the Swiss parent company. The regulator said UBS has fixed the issues and strengthened its procedures since 2009 and said its fine has no bearing in the ongoing criminal investigation.

The new investigation and the $1.49 billion bail amount represent the most recent developments in the ongoing investigation arising from allegations that UBS helped wealthy clients dodge French taxes by opening undeclared bank accounts in Switzerland. The Swiss bank was placed under investigation for “complicity in illegal sales practices” June 7. According to the BBC, investigators are looking into allegations that the bank broke French laws by soliciting potential clients in France. Those allegations came to light after a whistleblower sent a letter to French authorities saying the bank kept a special record between 2002 and 2007 listing undeclared bank accounts. UBS bankers also allegedly used sporting events and musical concerts to seek out affluent clients for tax evasion.

If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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Bank of America Corp. failed to win dismissal of two government lawsuits in which it is alleged to have misled investors about the quality of loans tied to $850 million in residential mortgage-back securities. U.S. District Judge Max O. Cogburn Jr. in Charlotte, North Carolina ruled that the SEC properly laid out claims that Bank of America lied to investors about the projected health of the mortgages. Additionally, Cogburn found that the government had not properly stated its case in a similar action that bank documents omitted material facts and included false statements but gave the U.S. Justice Department thirty days to revise the suit. The bank attempted to have the suit dismissed but failed.

The SEC’s case claims that Bank of America committed securities fraud, while the Justice Department’s case alleges that the lender violated a rarely used law dating all the way back to the 1980s savings-and-loan crisis. Using this law the DOJ can punish actions too old to be covered by other laws and allows the government to seek higher damages. In March, a magistrate judge gave advisory opinions stating that the SEC’s case should go forward while the DOJ’s case should be dismissed. Cogburn, however, decided that both cases should proceed.

The complaints assert that Bank of America failed to tell investors in its preliminary documentation that most of the mortgages were acquired through wholesale markets that executives were deriding at the time. The SEC further accuses the bank of failing to file the flawed documents with the SEC. The bank argues that the buyers were sophisticated financial institutions, buying the securities around 2007 and 2008, months before the U.S. real estate market collapsed. None of the institutions ever sued the bank.

Both of these cases are part of an ongoing effort by the U.S. government to punish companies for actions it believes helped trigger the financial crisis. By itself, Bank of America has spent more than $50 billion resolving claims pertaining to inferior mortgages, many of which were tied to its 2008 purchase of Countrywide Financial Corp.

If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-390-0036 to discuss your potential legal remedies.

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US banking giant JPMorgan Chase has agreed to pay USD 400 million in a settlement for litigation filed by Syncora Guarantee Inc. over mortgage-backed securities .

Syncora said it would drop the rest of its cases against the banking giant as a result of the $400 million settlement

The securities sold to Syncora came from Bear Stearns, which JPMorgan acquired in 2008 amid the financial crisis. Syncora said JPMorgan misrepresented the quality of mortgage assets linked to the securities .

The Syncora deal comes on the heels of several major JPMorgan settlements, including a $13 billion deal with the Department of Justice in November 2013 that resolved a series of US and state lawsuits over the sale of toxic mortgage-backed securities.

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On Feb. 19, RBS officials announced that the company had reached a $275 million settlement with the U.S. government to resolve allegations of misleading investors in mortgage-backed securities. The settlement is the third-largest settlement in the U.S. class action against banks packaged and sold mortgage securities .

This case was originally filed in 2008 by New Jersey Carpenters Health Fund and the Boilermaker Blacksmith Pension Trust. The suit accused RBS and others of violating U.S. securities law by packaging and selling an estimated $25.39 billion of securities in 14 separate offerings to linked to the Harborview Mortgage Loan Trusts. These mortgage loans did not meet underwriting guidelines, a fact the suit says RBS concealed. The loans later sank to junk status .

This settlement is just a drop in the bucket compared to the estimated losses suffered by investors. As more and more of these settlements take place it is important that investors take actions to protect their legal rights in these sorts of cases.

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On February 26, 2014, the Supreme Court decided Chadbourne & Parke LLP v. Troice, 571 U.S. ___ (2014), ruling by a 7-2 vote that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) does not bar state-law securities class actions in which the plaintiffs allege that they purchased uncovered securities that the defendants misrepresented were backed by covered securities. The decision is the important in that the Court has held that a state-law suit pertaining to securities fraud is not precluded by SLUSA. This is signifigant because it suggests that there are some limits to the broad interpretation of SLUSA’s preclusion provision that the Court has recognized in previous cases. Chadbourne should encourage more plaintiffs to pursue securities-fraud claims under state-law theories,the facts of a given case will still dictate what standard will be applied given this most recent ruling .

Chadbourne arose out of a multibillion dollar Ponzi scheme run by Allen Stanford and several of his companies. Stanford and his associates sold certificates of deposit issued by his bank and then used the money for their personal gain. Although these CDs were not covered securities under SLUSA, the defendants misrepresented that they were backed by highly marketable securities that were covered by the Act. After the plaintiffs learned of the fraud, they brought state-law class actions against alleged participants in Stanford’s scheme .

The Chadbourne case shows that the hard standard that was created under SLUSA will not preclude all state-law claims and that some state-law suits pertaining to securities fraud will be permissible.

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In the aftermath of the Barclays scandal, United States and British Lawmakers are cracking down on regulators that should have been more proactive and dedicated in preventing the years of illegal banking behaviors. The Dealbook.com article said that the Barclays $450 million settlement is but the first action from this broad and far-reaching investigation.

The article lists some of the many players in this cross-Atlantic investigation. They are including the House Financial Services Committee, the Senate Banking Committee, the Commodities Futures Trading Commission, the Justice Department and the New York Fed, to name a few of the American organizations. In the UK, the Parliamentary Committee as well as the Financial Services Authority of Britain are very active in the investigation.

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The Volcker Rule restricts the ability of federally insured banks to trade for their own benefit, according to this article in the New York Times.

The article states that with the large losses by banks in the trading of financial securities, especially mortgage-backed assets, there has been a push for more federal regulations. The Volcker Rule is one of the regulations pushed by the Obama Administration after the credit crisis.

The measure’s main purpose is to keep federally insured deposits of average banking customers out of risk. To do so, one major part of the bars banks from making proprietary trades. Those are when the bank uses their money to place bets on the market that are unrelated to serving their customers.  The rule would also bar banks from investing in hedge funds or in private equities.

The article states that the measure has been fiercely opposed by banks and large Wall Street firms.

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