MADISON, Wis. (3/26/13)--CUNA Mutual Group filed a brief Monday in a federal court in New York that argues documents it subpoenaed from ratings agency Standard & Poor's (S&P) are "highly relevant" to its claims in its lawsuit over residential mortgage-backed securities (RMBS) sold by RBS Securities.
S&P, in a motion last week before the U.S. District Court for the Southern District of New York, had alleged that CUNA Mutual's subpoena of documents was a fishing expedition that would involve tens of millions of pages of documents it had already produced to state and federal agencies, plus more than 100 transcripts of depositions. S&P is not a party in CUNA Mutual's suit against RBS.
"We strongly disagree with S&P and consider the documents we are seeking to be highly relevant to our claims against RBS," said Phil Tschudy, CUNA Mutual Group media relations manager.
"Specifically, we are seeking documents about the relationship between RBS and S&P with respect to S&P's rating of MBS, including whether RBS improperly influenced those ratings," he told News Now
. "The information is relevant because RBS claims to have no responsibility for the outcome of the S&P ratings."
CUNA Mutual's reply brief filed Monday "will establish the relevance and necessity of these documents in greater detail," Tschudy said.
The brief noted that a Pennsylvania court rejected a nearly identical argument made by S&P a week before it filed its motion in this case.
CUNA Mutual argues:
- Its subpoena seeks "relevant, discoverable information" that will show "among other things, that RBS engaged in a campaign of coercion against the credit ratings agencies to rate RMBS higher than justified so that RBS could use the inflated ratings to convince investors to purchase the securities."
- It would not be an undue burden to produce the documents since S&P already has collected and has available in ready-to-produce format the material CUNA Mutual seeks.
"CUNA Mutual already possesses documents showing that RBS attempted to bully credit ratings agencies, including S&P, to raise their ratings," said the company's brief. "The documents requested under the subpoena will provide the next link in the chain--they will show that RBS' tactics actually influenced S&P's behavior, and caused it to issue artificially high ratings."
CUNA Mutual's lawsuit against RBS is in the U.S. District Court for the Western District of Wisconsin, Madison. It claims rescission and unjust enrichment for more than $70 million in investments it made in 15 "investment grade" certificates from 10 RMBS offerings from 2004 to 2007. Investors later learned the certificates were backed by defective loans that were improperly underwritten, according to court documents.