A Credit Suisse Group AG (CSGN) unit was accused in a lawsuit by a U.S. credit union regulator of selling faulty mortgage-backed securities to three credit unions, causing them to collapse.
Credit Suisse Securities misrepresented the securities’ risks, leading the credit unions to believe there was little chance of losing money when they bought $715 million worth of them, the National Credit Union Administration said in a complaint filed yesterday in federal court in Kansas City, Kansas.
The securities were sold to U.S. Central Federal Credit Union, Western Corporate Federal Credit Union and Southwest Corporate Federal Credit Union. All three failed and resulting losses are paid by a fund supported by assessments on all federally insured credit unions, NCUA said in a statement.
Jack Grone, a spokesman for Credit Suisse in New York, declined to comment on the lawsuit.
The agency said it has sued seven other investment banks seeking to recoup losses from investments sold to credit unions.
The case is National Credit Union Administration Board v. Credit Suisse Securities (USA) LLC, 12-cv-02648, U.S. District Court, District of Kansas (Kansas City).
To contact the reporter on this story: Karen Gullo in San Francisco at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Hytha at email@example.com