Credit Suisse headquarters in Zurich, Switzerland. New York Atty. Gen.… (Alessandro Della Bella…)
New York Atty Gen. Eric T. Schneiderman sued Credit Suisse on Tuesday, accusing the Swiss Bank of systematically misleading investors who bought the firm’s mortgage-backed securities during the housing boom.
The lawsuit was brought in New York State Supreme Court on Tuesday under the state’s powerful Martin Act. The case is the latest to stem from a working group of state and federal regulators created earlier this year by President Obama investigating the role that large financial institutions played in creating the financial crisis.
In October, Schneiderman sued JPMorgan Chase & Co. contending the bank should be held liable for widespread fraud related to the packaging and sale of securities backed by residential mortgages.
Also last month, the U.S. attorney's office in Manhattan accused Wells Fargo of defrauding a government-backed mortgage insurance program of hundreds of millions of dollars over more than a decade by improperly underwriting more than 100,000 home loans.
In a conference call with reporters on Tuesday, Schneiderman said the working group investigations are far from over.
“The working group just got going this spring, and I think that we have a long way to go,” he said. “We are a long way from wrapping this up.”
The case against Credit Suisse is a "platform" case, involving the systematic behavior of the institution over time, Schneiderman said.
[Updated 12:55 p.m. Nov. 20: A spokeswoman for Credit Suisse said in an emailed statement that the case was without merit.
“We firmly reject this complaint which recycles baseless claims from private lawsuits and uses an inaccurate and exaggerated number," Victoria L. Harmon said. "We look forward to presenting our defense in court."]
The task force has not mounted criminal cases or taken action against individual investors. Schneiderman said those cases could come.
“Certainly nothing has been foreclosed by all the actions we have taken,” he said. “There still is an opening for complaints against individuals, and we will see where the evidence leads us.”
In his case against Credit Suisse, Schneiderman alleged that a U.S. arm of the company, Credit Suisse Securities, and its affiliates, made fraudulent omissions to investors in order to sell residential mortgage-backed securities during the boom. The losses from these securities sponsored and underwritten by Credit Suisse have suffered losses of $11.2 billion, the attorney general’s complaint alleges.
Credit Suisse allegedly misled investors into thinking the loans it was packaging and selling had been evaluated carefully and would be kept under systematic review, according to the complaint. The attorney general in his lawsuit accused the bank of failing to live up to these representations to investors.
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