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Germany sues U.S. Banks for fraud, demands money back

by Lady Michelle-Jennifer Santos, Founder & Publisher, Political Strategist, and Strategy/Peace Negotiator with the UN Security Council Special Envoy to the Arab Nations

September 7, 2012 (TSR) – The array of lawsuits continues for the U.S. banks since the financial meltdown as many have figured out fraudulent activities by these American companies. Many of Germany’s government-backed “Landesbanks” have suffered major losses as a result of bets on the U.S. housing market made prior to the financial crisis.

The latest German bank to sue their U.S. counterparts is German lender IKB Deutsche Industriebank AG, which was rescued after suffering multibillion-dollar losses on investments in U.S. subprime loans, filed a lawsuit against The Goldman Sachs Group Inc. (GS) and Citigroup Inc. (C) in New York state court on Wednesday for misrepresentation of documents and deception while selling $210 million in mortgage-backed securities (MBS).

Also on Wednesday, Reuters reported that UBS AG (UBS) sued Sealink Funding Ltd. over $158.1 million in MBS.

The lodged complaint, which involve $137 million in securities sold by Citi and $73 million in securities offered by Goldman, represent the latest in a string of complaints IKB has filed against big-name corporations it blames for its staggering losses and subsequent bailouts.

Both German claimants are saying that these U.S. banks issued misleading statements with omissions related to the mortgage-backed securities and concealed risks associated with these securities. IKB and Sealink claim that the documents given to them, which were used for offering the securities, contained fraudulent statements or omissions regarding the risks associated with the investments thereby giving misinterpretation of these investment risks which incurred losses at current levels.

Both IKB and Sealink have filed the lawsuits in the New York State Supreme Court in Manhattan and demand compensation for the damages. However, Goldman, Citi and UBS have refrained from commenting on the issue.

Lawsuits against Goldman Sachs has been piling up. Recently it was also sued by another German lender-Bayerische Landesbank in the Supreme Court over the same issue for $511.9 in fraudulent securities.

Last month, together with another Wall Street giant, Morgan Stanley (MS), was sued by another German lender, HSH Nordbank AG, for the sale of over $524 million and $110 million, respectively, in residential mortgage-backed securities.

There is a steady stream of similar German bank lawsuits, which are also filed in New York State Supreme Court against big-name issuers of mortgage-backed securities, including (but certainly not limited to):

1) February 2012: Germany’s fourth largest bank, DZ Bank AG  filed a lawsuit against JPMorgan Chase (JPM), saying that it purchased $85 million in MBS from JPMorgan based on flawed offering materials

2) February 2012: DZ Bank also filed against HSBC (HBC), claiming misrepresentations and omissions in offering materials, on $122 million in MBS purchases.

 

3) April 2012: German lender HSH Nordbank AG filed against two subsidiaries of Barclays PLC (BCS), claiming Barclays misrepresented the quality of loans underlying $46 million in mortgage-backed securities.

4) April 2012: The Bayerische Landesbank, one of eight German Landesbanks that are primarily owned by German state governments, filed a suit against Deutsche Bank AG (DB), accusing Deutsche Bank of committing fraud while selling $810 million in residential MBS.

5) May 2012: The Bayerische Landesbank also filed against Merrill Lynch, which was acquired by Bank of America (BAC) in January 2009, accusing Merrill of making misrepresentations in offering materials for $324 million in residential MBS.

6) June 2012: Separate lawsuits were filed by Sealink Funding and Landesbank Baden-Wuerttemberg Sealink against Barclays, claiming that Barclays made misrepresentations related to the sale of $604 million in MBS, while Landesbank Baden-Wuerttemberg claimed misrepresentations on $205 million in mortgage paper.

New York has a circa six-year statute of limitations for fraud claims, and time is running out for 2006 MBS deals, but mortgage loans continued to be packaged during 2007, so many can expect to see several lawsuits to continue for at least another year.

Many major financial institutions have waited the last minute because of their reluctance of suing each other and many are resorting to litigation since they have discovered that it is what works for them in the RMBS arena. Big settlements seems to become a trend for the next or so, like the recent Bank of America’s settlement in July with bond insurer Syncora Guarantee for $375 million where the claimants said that Countrywide Financial, which acquired by Bank of America in 2008, had committed “fraud and breach of contract arising from financial insurance provided for over $6 billion in residential mortgage-backed securities.”

Numerous lawsuits against banks doing blatant and fraudulent acts are expected to tarnish their reputation and financials over time. However, the investors and other financial institutions bearing the brunt of these faulty practices are expected to be fairly compensated at the end of the day. Nothing less can be expected in the global culture of greed.

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AUTHOR: Lady Michelle-Jennifer Santos

Lady Michelle-Jennifer Santos is the Founder & Publisher of The Santos Republic. She is also political strategist and analyst, investment consultant and advisor, and the Strategy/Peace Negotiator with the UN Security Council Special Envoy to the Arab Nations involved in brokering peace in the Middle East since 2011. She is also the Principal of MJS Global Group whose core competency is strategy, image/media, branding, geopolitics, international trade and development, communications, intelligence and security, aerospace, technology, entertainment, wealth management, mining, energy, infrastructure, commodities (gold, diamonds, oil and gas, sugar, cement, edible oils, rice, et al), and capital markets. also serves as a Senior Consulting Advisor for DeMatteo Monness LLC, a specialized agency brokerage with equity trading operations in New York and Boston and a member firm of the NASD and clears trades through Goldman Sachs Execution; Clearing LLC. With a background in working for international political campaigns, she is also a public speaker and lecturer on politics and motivational topics. Lady MJ has appeared and been featured in international media outlets (radio, television, print and internet) in Europe and USA such as Fox Business News, NRK, CNBC, CBS and AOL News. You can follow her on Facebook and on Twitter (@mj_santos). You can read more about her here.

One Response to Germany sues U.S. Banks for fraud, demands money back

  1. JackieG

    September 7, 2012 at 11:06 pm

    American assets in Germany might end up being seized.
    An American counter suit against German assets, it becomes, visa vi.
    Watch for a big decline in U.S./German trade.

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