Aug. 10 (Bloomberg) -- Goldman Sachs Group Inc. was accused by the National Credit Union Administration in a lawsuit of violating federal and state laws in the sale of mortgage-backed securities to now-failed corporate credit unions.
The NCUA said in a statement that it seeks damages of more than $491 million from Goldman Sachs. The complaint, filed yesterday in federal court in Los Angeles, is the fourth case aimed at recovering almost $2 billion from “sellers and underwriters of questionable securities,” the NCUA said. The agency said it expects to file five to 10 such cases.
“NCUA continues to carry out our responsibility to do everything reasonable in our power to seek maximum recoveries,” NCUA Chairman Debbie Matz said in the statement. “Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions.”
Stephen Cohen, a spokesman for New York-based Goldman Sachs, declined to comment on the lawsuit.
The complaint mirrors the NCUA’s July 18 suit against Royal Bank of Scotland Group Plc in the same court. It claims in the complaint that Goldman Sachs misrepresented securities in offering documents, causing the credit unions to believe the risk of loss was minimal when it was substantial.
Goldman Sachs “systematically abandoned the stated underwriting guidelines described in the offering documents” for the mortgages in the pools of collateralized residential mortgage-backed securities that it underwrote, the NCUA said in its complaint.
‘Delinquent or Default’
“Indeed, a material percentage of the borrowers whose mortgages comprised the residential mortgage-backed securities were all but certain to become delinquent or default shortly after origination,” according to the complaint.
The NCUA charters and regulates federal credit unions and insures their accounts, as well as those of many state-chartered credit unions in the U.S., according to the agency’s website. Yesterday’s complaint relates to the collapse of the U.S. Central and Western Corporate federal credit unions, two of the five liquidated under NCUA conservatorship, the regulator said in its statement.
On June 20, the NCUA separately sued New York-based JPMorgan Chase & Co. and Edinburgh-based RBS over similar claims in federal court in Kansas City.
Goldman Sachs rose $5.07, or 4.3 percent, to $122.73 in New York Stock Exchange composite trading yesterday. The shares have fallen 27 percent this year.
The case is National Credit Union Administration Board v. Goldman Sachs & Co., 11-06521, U.S. District Court, Central District of California (Los Angeles). The case against RBS in California is National Credit Union Administration Board v. RBS Securities, 11-5887, U.S. District Court, Central District of California (Los Angeles).