Dutch pension scheme ABP has taken up more legal proceedings against an investment manager, this time filing a suit in the New York State Supreme Court against Credit Suisse over alleged misleading practices concerning residential mortgage backed securities (RMBS), claiming it led to substantial losses
The third biggest pension scheme in the world, which invests over €239bn, brought in a complaint against Credit Suisse Group AG on 29 December. The claim is currently being assessed by the court.
The Dutch pension fund said it bought the securities between 2005 and 2007, and claims the Swiss bank misled the scheme about the quality of the RMBS.
It says it bought the securities from Credit Suisse "in reliance on the false and misleading statements that were made... Based on these material misrepresentations and omissions, ABP purchased securities that were far riskier than represented, backed by mortgage loans worth significantly less than represented, that had been made to borrowers who were much less creditworthy than had been represented."
The claim also reads that Credit Suisse knew about the poor quality of the loans it securitized and sold to investors like ABP, because "in order to continue to keep its scheme running, it completely vertically integrated their RMBS operations by having affiliated entities at every stage of the process".
ABP said the default rates have reached double digits on loans underlying nearly all of the securities it bought and that the AAA-rated securities are now "no longer marketable near the purchase prices paid by plaintiff".
Credit Suisse declined to comment and a spokesperson for ABP said it cannot reveal the total amount of losses being reclaimed.
Late last year, the civil servants' scheme, represented by Grant & Eisenhofer, took action against JPMorgan Chaseover residential mortgage-backed securities it is also said to have purchased.
The fund then claimed that JPMorgan and its subsidiaries had 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."
