* NCUA says more lawsuits could follow
* Suits involve mortgage-backed securities
* Seeks to recover losses at 5 wholesale credit unions
(Adds case numbers, RBS declining to comment, NCUA comment)
By Dave Clarke
WASHINGTON, June 20 The U.S. credit union
regulator filed lawsuits on Monday against JPMorgan Chase &
Co's (JPM.N) JPMorgan Securities and Royal Bank of Scotland
Group Plc's (RBS.L) RBS Securities, alleging misrepresentation
of investment vehicles backed by mortgages.
The National Credit Union Administration said the lawsuits
seek damages in excess of $800 million and are related to the
failure of five corporate credit unions.
The agency said in a statement on Monday that it may file
more lawsuits in an effort to recover billions of dollars in
losses related to the failure of these institutions.
"NCUA's legal actions are based on ongoing investigations
of individuals and entities responsible for selling these
securities to the failed institutions," said NCUA Board
Chairman Debbie Matz. "By these actions we intend to hold
responsible parties accountable."
JPMorgan and RBS declined to comment.
The lawsuits, filed in U.S. District Court in Kansas,
allege that the firms made "numerous misrepresentations" in the
offering documents for the securities.
"These misrepresentations caused the corporate credit
unions that bought the notes to believe the risk of loss
associated with the investment was minimal, when in fact the
risk was substantial," NCUA said.
Corporate credit unions provide services to retail credit
unions including lending, as well as check and payment
The wholesale credit unions have experienced more troubles
than their retail counterparts because they did not face the
same restrictions on permitted investments, leading to big
losses during the financial crisis.
The NCUA seized three large corporate credit unions in 2010
after seizing two in 2009.
The five institutions are Members United Corporate Federal
Credit Union of Warrenville, Illinois; Southwest Corporate
Federal Credit Union of Plano, Texas; Constitution Corporate
Federal Credit Union of Wallingford, Connecticut; U.S. Central
Corporate Federal Credit Union of Kansas; and Western Corporate
Federal Credit Union of California.
The NCUA said in September last year that the five had $50
billion in troubled assets on their books that the agency would
try to sell.
Matz said then the seizure will ultimately cost the
industry between $7 billion and $9 billion and NCUA will
collect this amount from credit unions over the next 10 years.
The lawsuit against RBS involves about $565 million in
claims while the lawsuit against JPMorgan involves about $278
million in claims, the agency spokesman said.
Any money recovered by the lawsuits would go toward
reducing the cost to credit unions of covering the failure of
the five institutions, the regulator said.
The cases are National Credit Union Administration v. JP
Morgan Securities LLC, U.S. District Court, District of Kansas,
No. 11-cv-2341 and National Credit Union Administration v. RBS
Securities Inc., U.S. District Court, District of Kansas, No.
(Reporting by Dave Clarke; Editing by Tim Dobbyn and Gerald E.