A settlement between the Department of Justice (DOJ) and UBS AG and several of its U.S.-based affiliates has resulted in the bank paying $1.435 billion in penalties. This settlement brings to a close the last case brought in the wake of the 2008 financial crisis.
The DOJ’s complaint alleged that UBS defrauded investors in connection with the sale of 40 residential mortgage-backed securities (RMBS) issued in 2006 and 2007. UBS allegedly made false and misleading statements it knew to be false to buyers of these securities relating to the characteristics of the mortgage loans underlying the RMBS in violation of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). The FIRREA claims were based on alleged violations of the mail, wire, and bank fraud statutes, the DOJ stated.
“In the wake of the 2008 financial crisis, people all across the country experienced financial ruin and emotional devastation, and many are still recovering nearly 15 years later,” Associate Attorney General Vanita Gupta said in a release. “As this settlement demonstrates, the department and our partner agencies remain committed to holding accountable those who break the law and undermine the well-being of American families.”
Principal Deputy Assistant Attorney General Brian Boynton, head of the DOJ’s Civil Division, said the results achieved by the department’s RMBS working group were a testament to the dedication and hard work by department attorneys over the years.
“We are grateful for the outstanding support provided by our partners in federal agencies and states that similarly sought to hold responsible those entities that contributed to the 2008 financial crisis.”
The specific issues cited in the complaint were the bank’s failure to mention in its publicly filed offerings that a significant portion of loans backing the RMBS did not comply with loan underwriting guidelines designed to assess the borrowers’ ability to repay. UBS also allegedly knew that property values associated with these loans were unsupported and that many of the loans had not been properly originated.
“This settlement represents accountability from those who thought they were above the law,” said U.S. Attorney Ryan Buchanan for the Northern District of Georgia. “UBS’ conduct at issue in this case played a significant role in causing a financial crisis that harmed millions of Americans. We will continue to seek accountability when financial institutions – large or small – misrepresent vital information to investors and undermine trust in our public markets.”