* Woori alleged losses on mortgage-linked CDOs
* Judge: No "telltale signals" of fraud
* Woori to address judge's concerns -lawyer
* Bank of America, Citigroup also sued
By Jonathan Stempel
NEW YORK, Dec 27 Royal Bank of Scotland Group
Plc on Thursday won the dismissal of a lawsuit by South
Korea's Woori Bank over losses from mortgage-related
investments, in a case between two big banks put under state
control following financial crises.
Woori, whose parent Woori Finance Holdings Co is
57 percent owned by the South Korean government, accused RBS of
selling it $80 million of collateralized debt obligations backed
by residential mortgage-backed securities (RMBS) that it knew
were riskier than their credit ratings suggested.
It also accused RBS of concealing its role in a multi-bank
scheme to manipulate the London Interbank Offered Rate (Libor),
on which the CDO investment returns were based.
U.S. District Judge Harold Baer in Manhattan, however, said
Woori's complaint was shorn of the "usual telltale signals" that
have persuaded other courts to allow similar cases accusing big
banks of fraud in mortgage securities to go forward.
Baer also said RBS had made many disclosures about the
securities' risks, and was not responsible for any defects in
Woori's own assessment about the soundness of its purchases.
"I am not persuaded that RBS, by virtue of greater
experience in the RMBS business, possessed some kind of
expertise significantly greater than Woori and was somehow
obligated to share it," Baer wrote. "It matters little that this
was a new area of investment for Woori .... Woori has the
relevant expertise; whether or not it put it to good use is a
different matter entirely."
Christopher Lebsock, a partner at the Hausfeld law firm
representing Woori, said in an email that Baer appeared
"concerned with certain technical defects in the pleadings
concerning RBS's knowledge of its conduct. The court has invited
us to address these issues in a letter, and we look forward to
A lawyer for RBS did not immediately respond to a request
Created in the aftermath of the 1997 Asian financial crisis,
Woori became the South Korean financial sector's biggest victim
of the U.S. subprime mortgage crisis, writing off much of a
roughly $1.5 billion stake in credit default swaps and CDOs.
The bank has lawsuits pending before other Manhattan federal
judges against Citigroup Inc and Bank of America Corp's
Merrill Lynch unit over alleged losses on a respective
$95 million and $143 million of debt securities.
In 2013, RBS is expected to settle with multiple regulators
over its alleged role in manipulating Libor, following earlier
settlements by Britain's Barclays Plc and Switzerland's
RBS was effectively nationalized, with the British
government taking an 82 percent stake, after incurring losses
linked to the 2008 global financial crisis.
The case is Woori Bank v. RBS Securities Inc et al, U.S.
District Court, Southern District of New York, No. 12-04254.