RBS to Pay $275M to Settle Mortgage-Backed Securities Claims

 NEW YORK — (Mealey’s) The Royal Bank of Scotland Group (RBS) will pay $275 million to settle claims that it concealed the investment quality of certain mortgage-backed securities sold in stock offerings in violation of federal securities laws, according to a press release issued today (New Jersey Carpenters Vacation Fund v. Harborview Mortgage Loan Trust 2006-4, et al., No. 08-5093, S.D. N.Y.).

According to the press release, the settlement, which is subject to approval by the U.S. District Court for the Southern District of New York, will be the third-largest mortgage-backed securities class action payment ever.

Lead plaintiffs New Jersey Carpenters Vacation Fund and the Boilermaker Blacksmith National Pension Trust filed their complaint in the District Court on behalf of all purchasers of Harborview Mortgage Loan Pass-Through Certificates pursuant to stock offerings and Securities and Exchange Commission “shelf” registration statements and prospectuses filed between April 2006 and October 2007. 

Securities Act

The lead plaintiffs alleged that Harborview Mortgage Loan Trust 2006-4, Harborview Mortgage Loan Trust 2006-5 and Harborview Mortgage Loan Trust 2006-9, the issuing entities of the pass-through certificates; RBS, which is the sole owner of Greenwich Capital Holdings Inc. (GCH); GCH and its subsidiaries Greenwich Capital Acceptance Inc. (GCA), Greenwich Capital Financial Products Inc. and Greenwich Capital Markets Inc.; GCA President and Director Robert J. McGinnis; GCA Chief Financial Officer Carol P. Mathis; three of GCA’s directors; and rating agencies Fitch Ratings, Moody’s Investor Services Inc. and Standard & Poor’s Ratings Services violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 by failing to “properly and carefully underwrite the subprime mortgage loans because they were being immediately packaged and sold in public offerings to investors such as Plaintiff.” 

Moreover, the  Harborview lead plaintiffs aver that the defendants issued a series of false and misleading statements concealing the alleged fraud in the registration statements and prospectuses for the offerings. 

Counsel

The lead plaintiffs are represented by Floyd Abrams, Susan Buckley, Adam Zurofsky and Tammy L. Roy of Cahill Gordon & Reindel in New York. 

The defendants are represented by Adam N. Zurofsky, Tammy L. Roy, Floyd Abrams and Susan Buckley of Cahill Gordon & Reindel in New York and Thomas C. Rice of Simpson Thacher & Bartlett in New York.

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