Two of the 13 accused banks have been dropped from a lawsuit filed by Virginia seeking $1.15 billion in damages for allegedly committing fraud against taxpayers during the real estate bubble, according to the Attorney General’s Office.
Michael Kelly, spokesman for Attorney General Mark R. Herring, said in an email Monday that J.P. Morgan Securities LLC and WAMU Capital Corporation had already agreed to a $3 million settlement that was approved under former Attorney General Ken Cuccinelli and former Gov. Bob McDonnell.
The terms were previously undisclosed by the Virginia Retirement System, which the suit alleges had been fraudulently misled during the sale of residential mortgage-backed securities to the state retirement fund.
While identifying the settlement “precludes further action against” the two banks at this time, Kelly said that state law allows the commonwealth to revive the claims within six months if circumstances permit.
“The suit is moving forward against the other 11 defendant banks, and it still seeks the largest ever potential damage recovery on behalf of Virginia taxpayers,” Kelly said.
Herring had announced the litigation at a news conference in Richmond last week.
Beginning in 2004, the banks, which also include Barclays Capital Inc.; Citigroup; Morgan Stanley; Deutsche Bank; and Goldman Sachs & Co., were packing mortgages into securities or bundles of mortgages “at a breakneck pace, selling them off to investors as sturdy, solid, top-rated investments that would continue to rise in value,” Herring said.
By 2010, Virginia was forced to sell most of these toxic securities and lost $383 million, according to a news release from the Attorney General’s Office.
Legal experts say that many of the defendant banks or their subsidiaries have already settled with the federal government in similar federal suits on terms very favorable to the United States.