Deutsche Bank AG (DBK) was sued in New York by Landesbank Baden-Wuerttemberg, which accuses the German bank of fraud in the sale of $173 million in mortgage-backed securities in 2007.

Deutsche Bank engaged in “egregious fraud,” selling securities that were riskier than promised and leading to losses, LBBW said in a complaint filed today in New York State Supreme Court.

LBBW, Germany’s biggest state-owned lender, said Deutsche Bank’s misconduct resulted in “astounding” rates of default on loans underlying the securities.

“We believe this suit is without merit and we intend to defend ourselves,” Amanda Williams, a spokeswoman for Frankfurt-based Deutsche Bank, said in an e-mail.

The case is Landesbank Baden-Wuerttemberg v. Deutsche Bank AG, 654543-2012, New York State Supreme Court (Manhattan).

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net