Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive
150x172_CUEffect.jpg
Contacts
LISA MCCUEVICE PRESIDENT OF COMMUNICATIONS
EDITOR-IN-CHIEF
MICHELLE WILLITSManaging Editor
RON JOOSSASSISTANT EDITOR
ALEX MCVEIGHSTAFF NEWSWRITER
TOM SAKASHSTAFF NEWSWRITER

News Now

CU System
Big Banks Argue Eastern Financial Florida CU Knew the Risks
MIAMI (7/23/13)--Four big banks and two ratings firms have filed a motion to dismiss a lawsuit brought in a Southern Florida federal court by Space Coast CU over $150 million in investment losses that led to the collapse of Eastern Financial Florida CU, which Space Coast later assumed.
 
Eastern invested the amount in collateralized debt obligations (CDOs) backed largely by residential mortgage-backed securities (RMBSs) between 2005 and 2007. 
 
The case involves instruments underwritten by Merrill Lynch, Pierce and Fenner Inc., J.P. Morgan Securities LLC, UBS Securities LLC and Barclays Capital, and rated by ratings agency The McGraw Hill Cos. (Standard & Poor's) and Moody's Investor Services.
 
The motion to dismiss notes that on March 18, the U.S. District Court in Miami rejected the Melbourne, Fla.-based Space Coast's claims of fraud but allowed Space Coast to amend its complaint. In that ruling, the court noted that the suit required "particularized facts" related to the frauds and the specific CDOs, instead of relying on broad due diligence reports, emails and government reports, forensic analysis and reliance on bankruptcy debtors' statements.
 
Space Coast's amended complaint alleged fraud, negligent misrepresentation, unjust enrichment, constructive trust and aiding and abetting fraud. In the motion to dismiss, the defendants argue that Eastern knew the risks. "Indeed the offering documents for these CDOs specifically warned Eastern about the unreliability of the subordination levels and the riskiness of investing in securities linked to subprime and non-conforming loans," said the banks' motion.
 
The banks also argued there is not enough facts supporting the credit union's allegations, that the amended complaint has "recycled allegations" that are not supported by particularized facts, and that the banks cannot be held liable for misstatements they did not make.
 
Like other defenses  in similar lawsuits over RMBS, in which the National Credit Union Administration sued a number of brokerage firms over losses experienced by corporate credit unions, the defendants also argue that the claims are "time-barred" and were not filed on time.


RSS





print
News Now LiveWire
.@CUNA's @Nussle on @SenatorReid :(2of2)On behalf of more than 102M #CU members,I thank him 4 his leadership over the yrs/wish him the best.
31 minutes ago
.@CUNA CEO Nussle on Sen. Reid’s decision not 2 seek re-election (1of2): Sen. Reid has a long history of #CU support throughout his career.
36 minutes ago
#Jobless claims duck under 300K for 3rd straight week #Market #Economy http://t.co/jOsZWf9HNJ
41 minutes ago
62% worry about financial stability: @CUNAMutualGroup study http://t.co/5jCM1I1hnA
2 hours ago
.@nytimes reports Sen. Harry Reid, Senate Democratic leader since 2005, will not seek re-election next year,
3 hours ago