Virginia Attorney General Initiates Record-Shattering False Claims Act Lawsuit

False Claims Act allegations

Commonwealth of Virginia Attorney General Mark R. Herring has initiated a $1.15 billion False Claims Act lawsuit against 13 banks for fraudulently misleading the Virginia Retirement System.
Image source: Wikimedia Commons

Earlier this month, Virginia Attorney General Mark R. Herring announced a record $1.15 billion lawsuit against several major banking institutions. The lawsuit stems from the rampant misconduct that eventually gave rise to the 2008 housing bubble, and includes the following defendants:

-Barclay’s Capital, Inc.

-Citigroup Global Markets Inc.

-Countrywide Securities Corporation

-Credit Suisse Securities (USA) LLC

-Deutsche Bank Securities, Inc.

-Goldman, Sachs & Co.

-RBS Securities, Inc.

-HSBC Securities (USA) Inc.

-Morgan Stanley & Co. LLC

-UBS Securities LLC

-WAMU Capital Corp.

-J.P. Morgan Securities LLC (and as current owner of Bear, Stearns & Co.)

-Merrill Lynch, Pierce, Fenner & Smith Incorporated (and as current owner of Banc of America Securities LLC)

The allegations involve fraudulent misrepresentation on the part of the banks with regard to mortgage-backed securities sold to the Commonwealth of Virginia’s retirement fund. The lawsuit is the largest ever filed under the Virginia False Claims Act.

Details of Virginia’s False Claims Act Allegations

The allegations against the 13 named banks in the lawsuit stem from the sale of residential mortgage-based securities to the Virginia Retirement System. Pursuant to the terms of transaction, the VRS was entitled to truthful, accurate information about the residential mortgages underlying the securities in order to make subsequent decisions on the best ways to invest taxpayer money and employee contributions. Allegedly, these banks fraudulently misled the VRS into believing the residential mortgages were low-risk, prime securities when, in fact, the mortgages were high-risk and sub-prime.

The complaint alleges that the Commonwealth purchased the securities beginning in 2004, and by 2010 was forced to sell the majority of the junk mortgages for a $383 million loss. The fraudulent misconduct affects nearly 600,000 state employees, including 145,000 teachers, 105,000 city and county government employees, 78,000 state employees, state troopers, local law enforcement, and court personnel. The VRS is funded 66% by taxpayer dollars and 33% by employee contribution.

Attorney General Herring Speaks Out

Attorney General Herring reiterated his position that the Commonwealth will not stand for this type of financial impropriety, particularly when it affects such an expansive number of people. More specifically, he stated “The message today is clear. It doesn’t matter if you’re a small-time con artist or a multi-billion dollar Wall Street bank. If you try to rip off or defraud Virginia consumers or Virginia taxpayers, you will be caught and you will be held responsible,” said Attorney General Herring.

Every Virginian was harmed by the financial crisis. Homes were lost, retirement accounts were devastated, small businesses saw their credit dry up almost overnight, and state and federal budget cuts hurt vulnerable Virginians. It will take many more years to recover the economic strength and stability we lost, but I will not allow Virginians to be left holding the bag for the reckless, fraudulent business practices of a few big banks who thought they were above the law. These banks lied to Virginia, and taxpayers and state employees lost hundreds of millions of dollars as a result.

Contact a Reputable Whistleblower Today

If you are aware of possible mortgage fraud or similar misconduct involving taxpayer money, please contact a whistleblower attorney at Berger Montague today.

contact us today to take the first step
By | 2018-03-25T14:04:21+00:00 October 7th, 2014|Mortgage Fraud|