U.S. sues Barclays, ex-executives for mortgage securities fraud

Thu Dec 22, 2016 7:56pm EST
 
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By Karen Freifeld

NEW YORK (Reuters) - The U.S. Department of Justice on Thursday sued Barclays Plc (BARC.L: Quote) and two former executives on civil charges of fraud in the sale of mortgage-backed securities during the run-up to the 2008-09 financial crisis.

The lawsuit was filed after Barclays resisted a penalty the U.S. government had sought in settlement negotiations, a person familiar with the matter said. The person would not disclose the government's demand.

Major U.S. banks, including JPMorgan Chase & Co (JPM.N: Quote) and Bank of America Corp (BAC.N: Quote), have paid tens of millions of dollars to settle similar claims over misconduct in the sale and pooling of mortgage securities, which helped to cause the financial crisis.

Barclays was among a handful of European banks still under investigation by the Justice Department, according to company disclosures. Deutsche Bank (DBKGn.DE: Quote) and Credit Suisse (CSGN.S: Quote) are also in settlement talks, sources have said.

Barclays is accused of deceiving investors about the quality of loans underlying tens of billions of dollars of mortgage-backed securities between 2005 and 2007, according to the lawsuit filed in U.S. District Court in Brooklyn.

Loans had been made to borrowers with no ability to repay and were based on inflated home appraisals, the complaint said.

According to the lawsuit, more than half the underlying loans in $31 billion worth of mortgage loans pooled into 36 deals defaulted.

"With this filing, we are sending a clear message that the Department of Justice will not tolerate the defrauding of investors and the American people," U.S. Attorney General Loretta Lynch said in a statement.   Continued...

 
The logo of Barclays is seen on the top of one of its branch in Madrid, Spain in this March 22, 2016 file photo. REUTERS/Sergio Perez/Files