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Hom e Briefing Room Justice News

Department of Justice
Office of Public Affairs FOR IMMEDIATE RELEASE Tuesday , Nov ember 20, 201 2

Residential Mortgage-Backed Securities Working Group Members Announce Charges Against Credit Suisse
Working Group Co-Chair New Y ork Attorney General Schneidermans Law suit Charges Credit Suisse Misrepresented Loan Quality Review Process, Deceived Investors Residential Mortgage-Backed Securities (RMBS) Working Group Co-Chair New Y ork Attorney General Eric T. Schneiderman today filed a Martin Act complaint against Credit Suisse Securities (USA) LLC and its affiliates for making fraudulent misrepresentations and omissions to promote the sale of RMBS to inv estors. According to New Y ork Attorney General Schneidermans lawsuit, Credit Suisse 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 2008. The lawsuit also alleges that RMBS sponsored and underwritten by Credit Suisse in 2006 and 2007 hav e suffered losses of approx imately $1 1 .2 billion. This is the fourth enforcement action from the RMBS Working Group, a joint federal and state initiativ e 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 RMBS. RMBS were pools of mortgages deposited into trusts and then sold as securities to inv estors who were to receiv e a stream of income from the mortgages packaged in the RMBS. According to the complaint, Credit Suisse led its inv estors to believ e that the quality of the loans in its mortgage-backed securities had been carefully ev aluated and would be continuously monitored howev er, Credit Suisse did neither. The complaint alleges that instead, Credit Suisse sy stematically failed to adequately ev aluate the loans, ignored defects that its limited rev iew did uncov er, and kept its inv estors in the dark about the inadequacy of its rev iew procedures and defects in the loans. The complaint further alleges that the loans in Credit Suisses mortgage-backed securities included many that had been made to borrowers who were unable to repay the loans, were v ery likely to default, and ultimately did default in large numbers. This lawsuit against Credit Suisse marks another significant step in our efforts to hold financial institutions accountable for the misconduct that led to the worst financial crisis in nearly a century , said New Y ork Attorney General Schneiderman. Our inv estigations and legal actions demonstrate that there must be 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 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 orks 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 working with the New Y ork Attorney Generals Office on the inv estigation, prov iding inv estigators and lawy ers, the U.S. Securities and Ex change Commission (SEC) collaborated and assisted with the case, and the Department of Justice prov ided resources from U.S. Attorney s offices around the country as well as from the RMBS Coordinating Team. Credit Suisse allegedly engaged in a far-reaching scheme to defraud inv estors, including Fannie Mae and Freddie Mac, said FHFA Inspector General Stev e Linick. As v ictims, Fannie Mae and Freddie Mac hav e sustained significant losses, which to date hav e been borne by tax pay ers. This lawsuit sends the clear message that reckless lending practices will not be tolerated.
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11/26/12

US Justice: Print Friendly Version

The Department of Justices specific role in the inv estigation included prov iding 1 1 Assistant U.S. Attorney s from offices all ov er the United States who interv iewed more than 40 significant market participants. In addition, the Department of Justice prov ided 1 1 inv estigativ e analy sts to assist in the rev iew of millions of documents. Today s filing by our working group partner and my fellow co-chair New Y ork Attorney General Schneiderman, represents another step toward holding accountable those whose actions led to the financial crisis and hurt so many Americans, said Principal Deputy Assistant Attorney General for the Civ il Div ision Stuart Delery . This action demonstrates the v alue and strength of the working group model and was made possible by contributions from a v ariety of members of the working group, who contributed resources, personnel and ex pertise to the dev elopment of this case. The number and breadth of recent RMBS actions, and the coordination and sharing among enforcement authorities that underlie them, prov e that the whole of the RMBS Working Group is greater than the sum of its parts, said Robert Khuzami, Director of the SECs Enforcement Div ision. The New Y ork Attorney General seeks inv estor damages to recoup these losses, as well as other equitable relief. Today 's announcement is part of the ongoing efforts of President Obama's Financial Fraud Enforcement Task Force's Residential Mortgage-Backed Securities (RMBS) Working Group, a federal and state law enforcement effort focused on inv estigating fraud and abuse in the RMBS market that helped lead the 2008 financial crisis. The RMBS Working Group brings together more than 200 attorney s, inv estigators, analy sts and staff from dozens of state and federal agencies including the Department of Justice together with 1 0 U.S. Attorney s' Offices and the FBI, the SEC, the Department of Housing and Urban Dev elopment (HUD), HUD's Office of Inspector General, the Federal Housing Finance Agency 's Office of Inspector General, the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserv e Board's Office of Inspector General, the Recov ery Accountability and Transparency Board, the Financial Crimes Enforcement Network and more than 1 0 state attorney s general offices around the country . The Working Group is led by fiv e co-chairs: Director of Enforcement for the SEC Robert Khuzami, New Y ork State Attorney General Eric Schneiderman, Assistant Attorney General for the Justice Department's Criminal Div ision Lanny Breuer, Principal Deputy Assistant Attorney General for the Justice Department's Civ il Div ision Stuart Delery and U.S. Attorney for the District of Colorado John Walsh. The RMBS Working Group Coordinator is Matthew Stegman. For more information about the RMBS working group and the Financial Fraud Enforcement Task Force, which is chaired by Attorney General Eric Holder, v isit: www.stopfraud.gov . 1 2-1 395 Civ il Div ision

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