LOS ANGELES, Calif.--The National Credit Union Administration filed suit today in Los Angeles, seeking $685 million in damages from RBS Securities for mortgage-backed securities it sold to the failed San Dimas-based Western Corporate Federal Credit Union.
It is the third lawsuit filed by the government agency stemming from the collapse of five corporate credit unions and the second against RBS, a unit of the Royal Bank of Scotland. The agency indicated it plans to file between five and 10 lawsuits.
The complaint alleges that the sellers and underwriters of the questionable securities made numerous material misrepresentations in the offering documents. Those misrepresentations caused WesCorp to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial, the suit aleges.
"NCUA continues to carry out our responsibility to do everything reasonable in our power to seek maximum recoveries,'' NCUA chairman Debbie Matz said in a statement. "By these actions we intend to hold responsible parties accountable.''
WesCorp was seized by the government in 2009 after incurring nearly $7 billion in losses, largely because of bad investments in mortgage-backed bonds.