ALEXANDRIA, Va. (Oct. 20, 2016) – The National Credit Union Administration today posted a new webpage with detailed information about recoveries from the NCUA Board’s lawsuits against the banks and securities firms that sold faulty securities to five corporate credit unions, which later failed.
The new webpage, available here, includes a summary of the litigation and information about recoveries, legal fees, and expenses.
“We were the first federal financial institutions regulator to sue these firms, and we were going up against some of the world’s most powerful institutions,” NCUA Board Chairman Rick Metsger said. “The outcome was far from certain, but we engaged expert outside counsel, and our team has been very successful. To date, we’ve obtained $4.3 billion in recoveries, significantly reducing potential assessments for credit unions.
“Net recoveries have repaid some of the claims on the estates of the five failed corporates, including those of the Temporary Corporate Credit Union Stabilization Fund,” Metsger said. “While earlier cases in which billions of dollars were at stake were pending, NCUA did not disclose attorney fee arrangements to protect our litigation position and ensure maximum returns. Now that most of the securities cases have been resolved, NCUA can state that, to date, legal fees to our two lead law firms come to approximately 23.2 percent of our total recoveries, or $1,003,029,479.”
NCUA’s outside attorneys took the cases under contingency fee arrangements, insulating credit unions from most costs if the cases were unsuccessful.
“Without this fee arrangement, which shifted most of the risk of these legal actions to outside counsel, there would have been no legal investigation of potential claims, no litigation, and no legal recoveries,” Metsger said.
NCUA’s Board, acting as liquidating agent for the five corporate credit unions, has filed 26 complaints against 32 defendants in federal courts in California, Kansas, and New York. The five corporate credit unions and the credit union system as a whole suffered billions of dollars in losses from the purchase of the faulty residential mortgage-backed securities.
Among the lawsuits filed were two complaints against 17 banks, alleging their manipulation of the London Interbank Offered Rate, or LIBOR, the benchmark used to set interest rates around the globe. That manipulation, the suits allege, resulted in the loss of income from investments and other assets by the failed corporate credit unions. The lawsuits also include four complaints against five trustees for residential mortgage-backed securities, alleging failure to fulfill duties to trust beneficiaries.