This action might not be possible to undo. Are you sure you want to continue?
US Justice: Print Friendly Version
Hom e » Briefing Room » Justice News
Department of Justice
Office of Public Affairs FOR IMMEDIATE RELEASE Tuesday , October 2, 201 2
Residential Mortgage-Backed Securities Working Group Members Announce First Legal Action
Co-Chair New Y ork Attorney General Eric Schneiderman Sues JPMorgan for Fraudulent Residential Mortgage-Backed Securities Issued by Bear Stearns The Residential Mortgage Backed Securities (RMBS) Working Group members today announced their first legal action since the working group formation earlier this y ear. In his role as a co-chair of the RMBS Working Group, New Y ork Attorney General Eric T. Schneiderman has filed a Martin Act lawsuit against J.P. Morgan Securities LLC (formerly known as Bear Stearns & Co. Inc.), JP Morgan Chase Bank N.A., and EMC Mortgage LLC (formerly known as EMC Mortgage Corporation) for making fraudulent misrepresentations and omissions to promote the sale of residential mortgage -backed securities (RMBS) to inv estors. According to Attorney General Schneiderman’s lawsuit, these defendants deceiv ed inv estors as to the care with which they ev aluated the quality of mortgage loans packaged into residential mortgage-backed securities prior to Bear Stearns & Co’s collapse in early 2008, incurring losses that hav e totaled approx imately $22.5 billion to date.
This lawsuit is the first legal action from the RMBS Working Group, a state-federal task force created by President Obama earlier this y ear to inv estigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities. New Y ork Attorney General Schneiderman was joined in the announcement by RMBS Working Group Co-Chairs: U.S. Attorney for the District of Colorado John Walsh, Assistant Attorney General for the Criminal Div ision Lanny Breuer, Acting Assistant Attorney General for the Civ il Div ision Stuart Delery and Director of the U.S. Securities and Ex change Commissions’ (SEC) Enforcement Div ision Robert Khuzami as well as RMBS Working Group Members Acting Associate Attorney General Tony West, Housing and Urban Dev elopment (HUD) Secretary Shaun Donov an and Federal Housing Finance Agency (FHFA) Inspector General Stev e Linick. “This lawsuit will bring accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy ,” said Attorney General Schneiderman. “Our lawsuit demonstrates that there is one set of rules for all – no matter how big or powerful the institution may be – and that those rules will be enforced v igorously . We believ e that this is a workable template for future actions against issuers of residential mortgage-backed securities that defrauded inv estors and cost millions of Americans their homes. We need real accountability for the illegal and deceptiv e conduct in the creation of the housing bubble in order to bring justice for New Y ork’s homeowners and inv estors.”
RMBS Working Group members contributed significantly to this effort. The Federal Housing Finance Agency Inspector General play ed a key role, prov iding inv estigators and lawy ers who rev iewed countless documents and interv iewed many witnesses. the SEC made crucial contributions, both in sharing its ex pertise with working group members and in giv ing members access to substantial ev idence in its inv estigations.
www.justice.gov /printf /PrintOut2.jsp 1/2
US Justice: Print Friendly Version
The Department of Justice prov ided 1 1 Assistant U.S. Attorney s from offices all ov er the United States who interv iewed more than 40 significant market participants. Three civ il attorney s and a financial analy st from the department’s Civ il Div ision, two financial analy sts from the RMBS Working Group’s Coordination Team, and a paralegal from the U.S. Attorney ’s office in the Eastern District of Tex as rev iewed more than 50 deposition transcripts taken in other litigation for significant ev idence. In addition, the Department of Justice prov ided 1 2 inv estigativ e analy sts to rev iew millions of pages of documents and the department’s Civ il Div ision conducted additional interv iews of critical witnesses in support of New Y ork’s inv estigation.
“This announcement demonstrates that the RMBS Working Group model works,” said RMBS Co-Chair and U.S. Attorney for the District of Colorado John Walsh. “The Department of Justice, including U.S. Attorney 's Offices across the country , the Office of the Inspector General for the Federal Housing Finance Agency and the SEC were proud to offer their ex tensiv e ex pertise and commit substantial resources in order to assist the New Y ork Attorney General’s efforts. This filing is a testament to the unity of purpose brought to bear by the RMBS Working Group and what is possible when we work together to achiev e justice for all Americans.” “Fannie Mae and Freddie Mac purchased residential mortgage-backed securities from the defendants and were allegedly misled about the quality of the loans supporting those securities. Actions like this contributed to the financial crisis and those who engaged in such activ ities should be held accountable,” said FHFA Inspector General Stev e Linick. “My office has worked and continues to work v ery closely with the RMBS Working Group and the New Y ork Attorney General’s Office in support of the inv estigation and prosecution of RMBS fraud cases.” For more information on RMBS Working Group Co-Chair New Y ork Attorney General Schneiderman’s case, please v isit: www.ag.ny .gov /press-release/ag-schneiderman-sues-jpmorgan-fraudulent-residentialmortgage-backed-securities-issued. For a copy of the complaint, please v isit: www.ag.ny .gov /sites/default/files/pressreleases/201 2/jpmcomplaint.pdf The RMBS Working Group is one of eight working groups within President Obama’sFinancial Fraud Enforcement Task Force (FFETF) which wascreated in Nov ember 2009 to wage an aggressiv e, coordinated and proactiv e effort to inv estigate and prosecute financial crimes. The FFETF is chaired by U.S. Attorney General Eric Holder and with its more than 20 federal agencies, 94 U.S. Attorney s’ offices and state and local partners, it’s the broadest coalition of law enforcement, inv estigatory and regulatory agencies ev er assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased inv estigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, v ictims, financial institutions and other organizations. Ov er the past three fiscal y ears, the Justice Department has filed more than 1 0,000 financial fraud cases against nearly 1 5,000 defendants including more than 2,7 00 mortgage fraud defendants.
More than 200 RMBS Working Group members are on the job, dev oting significant resources to inv estigate and prosecute misconduct by financial institutions in the origination and securitization of mortgages. Work is being done right now by state and federal working group members across the country on activ e inv estigations. The RMBS Working Group Coordinator is Matt Stegman. For more information about the RMBS Working Group and the Financial Fraud Enforcement Task Force, please v isit: www.stopfraud.gov . 1 2-1 1 96 Office of Public Affairs
www.justice.gov /printf /PrintOut2.jsp