The NCUA on Tuesday filed its ninth securities fraud lawsuit, this one in U.S. District Court in Kansas against Barclay's Capital Inc.
According to an NCUA release, the suit alleges Barclay's, the U.S. subsidiary of the British financial services firm, violated federal and state securities laws through misrepresentations in the sale of $555 million worth of mortgage-backed securities to failed corporate credit unions U.S. Central FCU and Western Corporate FCU.
“Trust and accountability are two cornerstones of our financial system,” said NCUA Board Chairman Debbie Matz. “As clearly outlined in our complaint, Barclay's violated that trust by issuing faulty disclosures on securities underwritten by the firm.
“As a result, two corporate credit unions collapsed, and the entire credit union industry experienced a crisis. Since then, NCUA has successfully worked to restore stability to the credit union system. Now we are working to hold Barclay's, and other responsible parties, accountable for their actions.”
The NCUA's complaint alleges Barclay's made numerous misrepresentations and omissions of material facts in the offering documents of the securities sold to the failed corporate credit unions.
The complaint also alleges systemic disregard of the underwriting guidelines stated in the offering documents. These misrepresentations caused U.S. Central and WesCorp to believe the risk of loss was minimal when in fact the risk was substantial.
The NCUA has previously filed similar actions against J.P. Morgan Securities, RBS Securities, Goldman Sachs, Wachovia and UBS Securities.
The agency has already settled claims worth more than $170 million with Citigroup, Deutsche Bank Securities and HSBC, making it the first federal regulatory agency for depository institutions to recover losses from investments in faulty securities on behalf of failed financial institutions.
If the NCUA recovers further damages from the seven remaining suits, the funds would be applied toward the Temporary Corporate Credit Union Stabilization Fund, reducing the assessments currently being paid by all federally insured credit unions.
Those credit unions have until Oct. 9 to pay a 2012 corporate assessment of 9.5 basis points worth nearly $800 million.
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