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Dexia vs JPM Amended Complaint

Dexia vs JPM Amended Complaint

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Published by zerohedge
Dexia vs JPM Amended Complaint
Dexia vs JPM Amended Complaint

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Published by: zerohedge on Feb 09, 2013
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04/04/2013

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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK 
DEXIA SA/NV; DEXIA HOLDINGS, INC.;FSA ASSET MANAGEMENT LLC; DEXIACRÉDIT LOCAL SA,Plaintiffs,v.BEAR, STEARNS & CO. INC., THE BEAR STEARNS COMPANIES, INC., BEAR STEARNS ASSET BACKED SECURITIES ILLC, EMC MORTGAGE LLC (f/k/a EMCMORTGAGE CORPORATION),STRUCTURED ASSET MORTGAGEINVESTMENTS II INC., J.P. MORGANACCEPTANCE CORPORATION I, J.P.MORGAN MORTGAGE ACQUISITIONCORPORATION., J.P. MORGANSECURITIES LLC (f/k/a JPMORGANSECURITIES INC.), WAMU ASSETACCEPTANCE CORP., WAMU CAPITALCORP., WAMU MORTGAGE SECURITIES,JPMORGAN CHASE & CO., and JPMORGANCHASE BANK, N.A.,Defendants.Index No. 650180/2012
AMENDED COMPLAINTJURY TRIAL DEMANDED
FILED: NEW YORK COUNTY CLERK 05/18/2012
INDEX NO. 650180/2012NYSCEF DOC. NO. 4RECEIVED NYSCEF: 05/18/2012
 
Case 1:12-cv-04761-JSR Document 35-1 Filed 01/21/13 Page 1 of 139
 
iTABLE OF CONTENTSI. PRELIMINARY STATEMENT ............................................................................................ 2II. JURISDICTION AND VENUE ............................................................................................. 7III. THE PARTIES........................................................................................................................ 7A. Plaintiffs .................................................................................................................................. 7B. Defendants .............................................................................................................................. 8IV. BACKGROUND AND NATURE OF THE FRAUD .......................................................... 13A. The Securitization Process .................................................................................................... 13B. Defendants’ Unique and Non-Public Knowledge about the Certificates TheyCreated, Issued and Sold ....................................................................................................... 161. Defendants’ Control Over The Securitizations ............................................................... 162. Defendants’ Control Over The Loan Pools Backing the RMBS .................................... 20C. Defendants Fraudulently Included Poor Quality Loans in the Securitizations ..................... 221. Bear Stearns .................................................................................................................... 222. Washington Mutual ......................................................................................................... 343. JPMorgan ........................................................................................................................ 50D. Defendants’ Involvement In Offerings Sponsored By Other Investment Banks .................. 591. Defendants’ Direct Involvement In Creating The Carrington, Nomura,Morgan Stanley and Newcastle Offerings ...................................................................... 612. Defendants’ Access to Material, Non-Public Information Regarding Other Offerings ......................................................................................................................... 643. Defendants’ Unique Knowledge Of The Loan Origination Practices Used ToCreate the Mortgage Pools .............................................................................................. 724. Defendants’ Misconduct Had a Devastating Impact on the Performance of the RMBS........................................................................................................................ 89E. Defendants Manipulated the Credit Ratings ......................................................................... 901. Defendants Knowingly Supplied False Information to the Rating Agencies ................. 912. Defendants Exerted Improper Pressure over the Rating Agencies ................................. 943. The Certificates Have Nearly All Been Downgraded to Junk ........................................ 97V. DEFENDANTS’ FALSE AND MISLEADING STATEMENTS ..................................... 100A. Loan Origination and Underwriting Standards ................................................................... 101B. Loan Selection and Due Diligence Practices ...................................................................... 104
Case 1:12-cv-04761-JSR Document 35-1 Filed 01/21/13 Page 2 of 139
 
iiC. Defendants’ False and Misleading Statements Regarding the Risk of Default .................. 1071. Borrower Credit Quality ............................................................................................... 1082. Occupancy Rates ........................................................................................................... 1103. Early Payment Defaults ................................................................................................ 112D. Defendants’ False and Misleading Statements Concerning the Value of theMortgage Collateral ............................................................................................................ 113E. Defendants’ False and Misleading Statements Concerning the Credit Ratings ................. 115VI. PLAINTIFFS REASONABLY RELIED ON DEFENDANTS’REPRESENTATIONS ....................................................................................................... 117VII. ADDITIONAL ALLEGATIONS DEMONSTRATING SCIENTER ............................... 119A. Defendants Are Securitization Experts Who Consciously Included Poor QualityLoans in the Securitizations ................................................................................................ 120B. Numerous Confidential Witnesses Confirm that Defendants DeliberatelySecuritized Poor Quality Loans .......................................................................................... 121C. Defendants Profited Enormously from their Fraud ............................................................ 123D. Bear Stearns Deliberately Purged Its Due Diligence Records ............................................ 123VIII. PLAINTIFFS SUFFERED LOSSES BECAUSE OF DEFENDANTS’FRAUDULENT CONDUCT .............................................................................................. 124IX. CAUSES OF ACTION ....................................................................................................... 125X. PRAYER FOR RELIEF ..................................................................................................... 144
Case 1:12-cv-04761-JSR Document 35-1 Filed 01/21/13 Page 3 of 139

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