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News Now

Washington
NCUA seeks 629M in damages from RBS Securities
ALEXANDRIA, Va. (7/19/11)--The National Credit Union Administration (NCUA) is seeking $629 million in damages from RBS Securities, again alleging that that firm violated federal and state securities laws when it sold securities to Western Corporate FCU. This is the third suit of its kind. Similar suits have been filed against RBS Securities and J.P. Morgan Securities, LLC in Kansas federal district court. Those suits related to securities that were purchased by U.S. Central FCU, based in Lenexa, Kansas. The NCUA in its suit has claimed that RBS’ sellers and underwriters “made numerous material misrepresentations in the offering documents. “These misrepresentations caused WesCorp to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial. The mortgage-backed securities experienced dramatic, unprecedented declines in value, effectively rendering WesCorp insolvent,” the agency added. The NCUA said the suits are intended to "recover losses from the purchase of securities that caused the failures" of five large wholesale credit unions. Those institutions are U.S. Central, WesCorp, Southwest Corporate, Members United Corporate, and Constitution Corporate. The agency is currently requesting $1.5 billion in combined damages, and has said that as many as seven additional court actions could be taken. Any recoveries from these actions will reduce the total losses resulting from the failure of the five corporate credit unions and would help to reduce the amount of future corporate credit union stabilization fund assessments on credit unions, the NCUA has said. NCUA Chairman Debbie Matz said that it is the agency’s “statutory duty to replenish the insurance fund that protects consumer deposits by seeking recoveries. “Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions,” Matz added. The Credit Union National Association (CUNA) has encouraged the NCUA to take "all reasonable actions" available to pursue effective restitution from securities firms who "share the culpability for the events that led to the corporate failures."


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