Dec. 11 (Bloomberg) -- Credit Suisse Group AG said the New York attorney general’s lawsuit accusing it of fraud over mortgage-backed securities should be thrown out because the claims were filed too late and were partly resolved by a settlement with regulators.
Attorney General Eric Schneiderman sued Zurich-based Credit Suisse in state Supreme Court in Manhattan in November 2012, saying the bank led investors to believe it had evaluated the loans backing the securities and would monitor their quality, while failing to actually review the loans.
Richard Clary, an attorney with Cravath Swaine & Moore LLP representing Credit Suisse, today asked Justice Marcy Friedman to dismiss the suit, arguing the claims are based on alleged conduct that took place more than three years earlier and are barred by a statute of limitations.
Clary also said that part of the suit should be dismissed because it’s based on some of the same allegations covered by a settlement with the U.S. Securities and Exchange Commission, which works with the attorney general’s office. Both are members of the Residential Mortgage-Backed Securities Working Group, a part of the Justice Department’s task force set up by President Barack Obama to probe causes of the financial crisis.
“When one member of that working group brings a set of claims and they have been resolved, another member of the working group cannot bring claims against the same defendant,” Clary said.
Credit Suisse and New York-based JPMorgan Chase & Co. in November 2012 agreed to pay $417 million to settle U.S. regulatory claims that they misled investors by selling billions of dollars of investments linked to home loans.
Schneiderman also sued JPMorgan in New York State Supreme Court in October 2012, alleging that Bear Stearns Cos., the investment bank JPMorgan acquired in 2008, defrauded investors.
That suit was resolved last month when JPMorgan, the biggest U.S. lender by assets, agreed to a record $13 billion settlement to end Justice Department probes into the bank’s sale of mortgage bonds that officials said helped feed the financial chaos of 2008.
Credit Suisse knew there were “pervasive flaws” in the screening process and was more focused on maintaining a high volume of loans from originators than keeping defective mortgages out of the pools of loans, according to Schneiderman’s office.
Schneiderman’s office argued in a court filing that it has six years to bring investor fraud claims under New York’s Martin Act, which allows prosecutors to fight financial fraud, and another law that allows the state to seek injunctive relief and damages against businesses that engage in repeated fraud.
Virginia Chavez Romano, Schneiderman’s deputy attorney general for economic justice, told Friedman that the settlement with the SEC still gives her office the option to seek other forms of relief from Credit Suisse.
“The notion that multiple government agencies can’t have overlapping interests lacks common sense,” Romano said.
The case is People of the State of New York v. Credit Suisse Securities (USA) LLC, 451802-2012, New York State Supreme Court, New York County (Manhattan).
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