BROOKLYN, N.Y. (Legal Newsline) — The
U.S. Department of Justice announced Dec. 22 it has filed a civil complaint
against Barclays Bank PLC and many of its affiliates. The department alleges Barclays engaged in a fraudulent scheme to sell residential mortgage-backed
“Financial institutions like
Barclays occupy a position of vital public trust,” Attorney General Loretta E. Lynch said.
“Ordinary Americans depend on their assurances of transparency and legitimacy,
and entrust these banks with their valuable savings. As alleged in this
complaint, Barclays jeopardized billions of dollars of wealth through practices
that were plainly irresponsible and dishonest.
"With this filing, we
are sending a clear message that the Department of Justice will not tolerate
the defrauding of investors and the American people.”
From 2005 to 2007, Barclays
purportedly misrepresented the characteristics of its RMBS loans that were sold to
investors across the globe. Because of the alleged scheme, investors lost
billions of dollars. The department alleges Barclays violated the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA).
“The widespread fraud that
investment banks like Barclays committed in the packaging and sale of
residential mortgage-backed securities injured tens of thousands of investors
and significantly contributed to the financial crisis of 2008,” said principal
deputy associate attorney general Bill Baer.
Two former Barclays
executives were named as additional defendants in the lawsuit: Paul K. Menefee
and John T. Carrol. Menefee was the head banker for subprime RMBS
securitizations, while Carroll served as the company’s head trader for
subprime loan acquisitions.