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US Sues Barclays Bank to Recover Civil Penalties for Fraud in the Sale of Residential Mortgage-Backed Securities

News release: “The United States Department of Justice today filed a civil complaint in the Eastern District of New York against Barclays Bank PLC and several of its United States affiliates (together, Barclays), alleging that Barclays engaged in a fraudulent scheme to sell residential mortgage-backed securities (RMBS) supported by defective and misrepresented mortgage loans.  As alleged in the complaint, from 2005 to 2007, Barclays personnel repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses as a result of the fraudulent scheme.  The suit also names as defendants two former Barclays executives:  Paul K. Menefee, of Austin, Texas, who served as Barclays’ head banker on its subprime RMBS securitizations, and John T. Carroll, of Port Washington, New York, who served as Barclays’ head trader for subprime loan acquisitions. The detailed allegations in the complaint describe Barclays’, Menefee’s, and Carroll’s misconduct in connection with RMBS securitizations Barclays underwrote between 2005 and 2007.  The complaint alleges violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), based on mail fraud, wire fraud, bank fraud, and other misconduct.  FIRREA authorizes the Attorney General to seek civil penalties up to the amount of the gain to the violator or the losses suffered by persons other than the violator…”

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