UBS AG, the largest Swiss bank, won dismissal of a U.S. pension fund’s lawsuit claiming it made misstatements and omissions in a $2.5 billion offering of mortgage-backed securities in 2007.
The Pension Trust Fund for Operating Engineers failed to sue Zurich-based UBS within the required one-year period after it should have begun investigating underwriting problems in home loans backing the securities, the U.S. Appeals Court in Philadelphia ruled today.
The Operating Engineers first sued in federal court in New Jersey on Feb. 22, 2010. The pension fund should have investigated after a separate lawsuit was filed on Sept. 9, 2008, in California state court against UBS Securities LLC and Countrywide Financial Corp. alleging false and misleading statements in offerings, the appeals court said.
“A reasonably diligent plaintiff who had purchased mortgage-backed securities from UBS Securities based on loans that were largely originated by Countrywide would have noticed that complaint,” the Third Circuit court ruled.
Countrywide originated 52 percent of the mortgages backing the certificates and IndyMac Bancorp Inc. originated 40 percent, according to the ruling. IndyMac failed in mid-2008 and Countrywide was acquired by Bank of America Corp. in 2008.
Since then, Charlotte, North Carolina-based Bank of America has written down losses of more than $40 billion related to the Countrywide acquisition. The U.S. sued Bank of America in August over an $850 million mortgage bond deal
The pension fund, based in Alameda, California, bought certificates with a face value of $5.1 million, according to the ruling. The pension fund sought to proceed as a group, or class-action, lawsuit.
The case is Pension Trust Fund for Operating Engineers, 12-03454, U.S. Court of Appeals for the Third Circuit (Philadelphia).