23rd Dec 2016 06:23
LONDON (Alliance News) - The US Department of Justice said on Thursday it filed a civil complaint in the Eastern District of New York against Barclays Bank PLC and several of its US affiliates, alleging that Barclays engaged in a fraudulent scheme to sell residential mortgage-backed securities supported by defective and misrepresented mortgage loans.
According to the lawsuit, from 2005 to 2007, Barclays personnel repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses as a result of the fraudulent scheme.
The suit also names as defendants two former Barclays executives: Paul Menefee, of Austin, Texas, who served as Barclays' head banker on its sub-prime RMBS securitisations, and John Carroll, of Port Washington, New York, who served as Barclays' head trader for sub-prime loan acquisitions.
The detailed allegations in the complaint describe Barclays', Menefee's, and Carroll's misconduct in connection with RMBS securitisations Barclays underwrote between 2005 and 2007. The complaint alleged violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, or FIRREA, based on mail fraud, wire fraud, bank fraud, and other misconduct.
FIRREA authorises the Attorney General to seek civil penalties up to the amount of the gain to the violator or the losses suffered by persons other than the violator.
However, Barclays said it rejected the claims made in the complaint. "Barclays considers that the claims made in the complaint are disconnected from the facts. Barclays will vigorously defend the complaint and intends to seek its dismissal at the earliest opportunity," the bank said.
Meanwhile Steven Perez, Special Agent in Charge at the Federal Housing Finance Agency Office of the Inspector General or FHFA-OIG said, "As the complaint alleges, Barclays knowingly sold investors RMBS backed by loans it knew were made to borrowers who were not creditworthy and which were supported by house appraisals it knew were inflated."
Copyright RTT News/dpa-AFX
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