Virginia files lawsuit against plutocrats who conned state with toxic mortgages.
By Ronald L. Ray —
True to its state motto — “Sic semper tyrannis,” or “Thus always to tyrants” — the Commonwealth of Virginia has brought a $1.15 billion civil fraud lawsuit against a “banker’s dozen” of the largest international investment houses. Attorney General Mark R. Herring announced the case in mid-September, which was filed in Richmond Circuit Court. In a prepared statement, the Office of the Attorney General (OAG) alleged that the big banks deliberately misrepresented the quality of residential mortgage-backed securities (RMBS), a form of financial derivative, sold to the Virginia Retirement System (VRS), beginning in 2004.
Prior to 2010, “Virginia was forced to sell the vast majority of these toxic securities built on junk mortgages and lost $383 million.” The attorney general now seeks to obtain the maximum penalty allowed by law, in order to redress the harm done to Virginia taxpayers. The OAG expects that the money recovered will go to repay the taxpayers and VRS for their losses.
In a virtual “who’s who” of plutocratic pirates, 13 mega-banks have been accused of violating the commonwealth’s 2002 Fraud Against Taxpayers Act, which permits treble damages for losses, plus additional penalties.
According to the Richmond Times-Dispatch, however, two JPMorgan Chase subsidiaries, JPMorgan Securities LLC and WAMU Capital Corporation (formerly Washington Mutual), were dropped subsequently, when the OAG learned thatHerring’s predecessor, Kenneth T. Cuccinelli II, had previously reached a secret settlement with the two firms for $3 million. Depending on circumstances, however, they could be sued in the future.
The remaining “banker’s dozen” are subsidiaries of the world’s biggest institutional usurers: Barclays, Citigroup, Countrywide, Credit Suisse, Deutsche Bank, Goldman Sachs, RBS, HSBC, Morgan Stanley, UBS and Merrill Lynch.
In brief, Virginia alleges that 220 securities it purchased were offered as being rated AAA or similarly, with 0% delinquency. This factor is important to institutional investors like Virginia because of the need for a stable and secure return. However,75% of the mortgages eventually defaulted. The RMBSs were backed by 785,000 mortgages, of which 40% were “fraudulently misrepresented.” The OAG stated that the banks “knew, or should have known,” that claims in their prospectuses and sales presentations were false.
The fraudulent practices were discovered by Integra REC, LLC, “using extremely sophisticated proprietary methods” to match RMBSs with the respective individual mortgages, said the OAG.
The first of three main accusations is that the banks misrepresented the loan-to-value ratio (an indication of likely default). On average, only 23.4% of loans were represented as being for more than 80% of property value, when it was really 54%. Fifteen percent were “underwater.” Further, rates of owner occupancy were overstated significantly, and second mortgage numbers were severely understated. Both of these latter factors also contribute to delinquency rates.
Herring stated: “Every Virginian was harmed by the financial crisis. Homes were lost, retirement accounts were devastated, small businesses saw their credit dry up almost overnight. . . . 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 [nearly 600,000] state employees lost hundreds of millions dollars as a result.”
As a measure of Herring’s confidence and resolve, the Commonwealth of Virginia has demanded a jury trial. It is to be hoped that true justice will be served, and that there will be no further secret settlements that allow the plunderous plutocrats to return to usury as usual.
Despite a nearly endless stream of revelations of the moneylenders’ wrongdoing—now including collusion by the Federal Reserve—at least one apologist for the weasels of Wall Street, Matthew E. Fishbein, suggests in the New York Law Journalthat the banksters and other corporate criminals are the victims, forced by evil government lawyers to admit to things they believe they did not do. He goes so far as to call cases similar to the Virginia lawsuit “marginal,” because they involve only a few hundred million dollars.
But the truth is that the international bankers are usurious pirates, bent on sucking every cent out of the nearly empty pockets of widows and orphans. They have created a corporate culture of corruption, which is destroying nearly every economy on the face of the planet. It is time to end the financial pharaohs’ stranglehold on the common man by ending usury and putting every single one of these predatory banks out of business.
Ronald L. Ray is a freelance author and an assistant editor of THE BARNES REVIEW. He is a descendant of several patriots of the American War for Independence.
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