ABP, one of the largest pension schemes in the world, yesterday filed a suit at the New York state Supreme Court against JPMorgan Chase over residential mortgage-backed securities it is said to have purchased
The fund claims JPMorgan and its subsidiaries have given false and misleading statements which eventually led to the purchase of "securities that were far riskier than had been represented, backed by mortgage loans worth significantly less than had been represented, and that had been made to borrowers who were much less creditworthy than had been represented."
In the court's official documents, ABP, which has over €250bn in assets according to data held by Pension Funds Online,says it is basing its evidence for alleged misleading practices from JPMorgan on information from its own investigation. This, the fund says, includes a review and analysis of annual reports and publicly filed documents, reports of governmental investigations, as well as press releases, news articles, analysts' statements, conference call transcripts, and transcripts from speeches and remarks given by the defendant.
The public employer scheme is represented in the case by Grant & Eisenhofer.
ABP says in the claim that the securities purchased were collateralized against mortgages originated and/or acquired by JPMorgan Bank, EMC, Long Beach Mortgage and Washington Mutual Bank, as well as various other third-party originators.
"These originators did not, however, hold the mortgage loans they originatedand/or acquired. Rather, taking advantage of an unprecedented boom in the securitization industry, these [parties] flipped their mortgage loans to investment banks, which then repackaged the loans and sold the loans as RMBS [residential mortgage-backed securities] to investors seeking safe investments, such as ABP," the lawsuit reads.
The loans went into default at high rates, and could no longer be sold at the prices paid. This allegedly caused the losses on the investment. A spokesperson for the scheme said ABP is unwilling to disclose any figures.
JPMorgan has declined to comment on the case.
The full case as handed in at the New York state Supreme Court in Manhattan can be found here.
azeevalkink@wilmington.co.uk
