ALEXANDRIA, Va. (9/7/12)--UBS Securities on Thursday joined the list of Wall Street firms that have been sued by the National Credit Union Administration (NCUA). The agency alleged that UBS violated federal and state securities laws when it sold securities to U.S. Central Corporate FCU and Western Corporate FCU that caused losses.
The NCUA's complaint, which was filed in Kansas federal district court, states that UBS sellers and underwriters made numerous material misrepresentations in the offering documents when that firm sold a combined $1.1 billion in securities to the two failed corporates.
These misrepresentations caused U.S. Central and WesCorp to believe the risks of loss associated with these investments were minimal, when in fact the risks were substantial, said NCUA.
"The strength of our entire financial system relies on trust and accountability," NCUA Board Chairman Debbie Matz said in a release. "As our complaint makes clear, UBS Securities violated this trust, which contributed to the collapse of two corporate credit unions and the resulting crisis in the credit union industry. NCUA has worked to restore stability to the credit union system. Now we intend to hold UBS Securities, as well as other responsible parties, accountable," she added.
For the full NCUA release, use the resource link.
The agency has also settled with Citigroup, Deutsche Bank Securities, and HSBC, avoiding the cost of litigation and bringing in more than $170 million in funds that were lost due to the corporate credit union investments. The NCUA has also filed five similar actions against J.P. Morgan Securities, RBS Securities, Goldman Sachs, and Wachovia, and each of these suits are progressing through the court system.
U.S. District Judge Richard D. Rogers of the U.S. District Court for the District of Kansas in late July gave the agency permission to move forward with a combined lawsuit against RBS Securities and Wachovia.
While elements of the NCUA's suit had been questioned by the defendants, the judge said the agency had met the statute of limitations requirement in filing the suit with an extension of time, called an "extender clause," and had provided enough evidence to make a "plausible" claim of misrepresentation by the banks regarding the risk of the securities bought by the corporates.
The certificates in question were offered and sold to U.S. Central in 2006 and 2007, more than three years before NCUA filed the lawsuit on June 20, 2011. The banks had argued that NCUA had not met the required statute of limitations, as the securities in question were sold to the corporates in 2006 and 2007. However, the judge said NCUA had not waited too late to file its suits. He also noted that the NCUA could not have known the specifics of the securities offered to the corporates until it took them under conservatorship. (See related July 27 News Now story: Court: NCUA's Wall St. bank suits can proceed)