A large bank, along with affiliated entities, recently reached a settlement agreement for $2 billion with the Department of Justice (DOJ) to settle a civil action originally filed in December 2016, in which the DOJ sought civil penalties in connection with alleged fraudulent activities occurring between 2005 and 2007.
The DOJ civil action followed a three-year investigation into the bank’s activities, which resulted in a complaint alleging that the bank engaged in a systematic and intentional scheme to mislead investors about the quality of the mortgage loans backing the securities. The allegations involved 36 RMBS deals securitizing over $31 billion worth of subprime and Alt-A mortgage loans. More than half of these loans defaulted, causing investors to lose billions of dollars. According to the DOJ, the bank’s alleged actions included mail fraud, wire fraud, bank fraud, and other misconduct, which violated the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).
The settlement agreement also required a combined payment of $2 million in civil penalties by two former bank executives.
More information on the DOJ settlement agreement can be found here.