| NEW YORK
NEW YORK Nov 20 New York Attorney General Eric
Schneiderman brought a lawsuit on Tuesday accusing Credit Suisse
Group AG of misleading investors in mortgage-backed
Credit Suisse, Switzerland's second-largest bank,
misrepresented the quality of loans underlying residential
mortgage-backed securities it sponsored and underwrote in 2006
and 2007, leading to $11.2 billion in losses to investors,
according to the lawsuit.
The Zurich-based bank failed to adequately evaluate the
loans and ignored defects its limited review did uncover, the
lawsuit said It also failed to perform due diligence it
promised. The lawsuit was brought under a New York securities
fraud statute known as the Martin Act.
Jack Grone, a spokesman for Credit Suisse in the United
States, declined to make an immediate comment. The bank
announced a management shake-up on Tuesday.
The action is the latest to come out of a working group
created by President Barack Obama to go after wrongdoing that
led to the 2008 financial crisis.
The lawsuit "marks another significant step in our efforts
to hold financial institutions accountable for the misconduct
that led to the worst financial crisis in nearly a century,"
Schneiderman said in a statement. He is co-chair of the group.
On Friday, the bank agreed to pay $120 million to settle
U.S. civil charges that it misled investors in the sale of risky
mortgage bonds prior to the crisis. JPMorgan Chase & Co,
in a separate but similar case, agreed to pay $296.9 million.
The banks settled without admitting wrongdoing.
Schneiderman also brought a lawsuit against JPMorgan Chase
last month over mortgage-backed securities packaged and sold by
Bear Stearns & Co, which JPMorgan acquired during the financial
The working group's actions are viewed as a last shot for
the government to hold banks and others responsible for
misconduct in the run-up to the mortgage meltdown.
Credit Suisse, JPMorgan and other banks have already been
sued by pension funds, insurers and others who claim they
misrepresented the quality of mortgages underlying securities.
The case is People of the State of New York v. Credit Suisse
Securities, 451802/2012, New York state Supreme Court, New York