Credit Suisse Group AG was ordered to face a $10 billion lawsuit by New York’s attorney general accusing the Swiss bank of fraud in the sales of mortgage-backed securities before the 2008 financial crisis, Bloomberg said.
A New York State Supreme Court justice rejected the bank’s request to dismiss the case, a move that gives leverage to Attorney General Eric Schneiderman to demand internal bank documents and force a settlement. New York demonstrated the bank may have engaged in misconduct, Justice Marcy Friedman said in a Dec. 24 decision, allowing the suit to head toward trial, the report said.
In addition to forcing Zurich-based Credit Suisse to defend itself or settle, the ruling may strengthen Schneiderman’s hand in punishing other banks for bad behavior tied to the recession.
Elizabeth DeBold, a spokeswoman for Schneiderman, said the lawsuit is part of an effort to pursue “accountability for those who contributed to the near collapse of our economy.” Drew Benson, a spokesman for Credit Suisse, said yesterday in an e-mail that the bank will appeal the ruling, Bloomberg said.
New York sued Credit Suisse in November 2012, claiming Switzerland’s second-largest bank misrepresented the risks of investing in mortgage-backed securities. Last year, the bank argued that New York missed a three-year deadline for suing. The state countered that it had six years to file its complaint, said the report.
If the bank had won, Schneiderman would have faced a new roadblock as he considers similar multibillion-dollar claims against Wall Street firms.
Armed with the Martin Act, New York’s powerful anti-fraud statute, Schneiderman has pursued banks while introducing programs to relieve struggling homeowners and stem a rise in foreclosures. He claimed Credit Suisse knew about “pervasive flaws” in the screening of residential loans underlying mortgage securities it sold, but assured investors they were safe because it wanted to expand its business, Bloomberg said.
Under the Martin Act, “false promises” by sellers of securities are against the law.
Schneiderman has been in the public eye since he was elected to the State Senate in 1998. The progressive Jewish Democrat from Manhattan’s Upper West Side describes Judaism as a driving force in his political philosophy, according to the Jewish Daily Forward.
The Attorney General has pledged to fight all sorts of hate and anti-Semitic attacks against the Jewish community in the state of New York, the Jewish Voice said.
“Justice has to be justice for everyone, ” the Voice quoted him as saying. “We have to be able to send a message that New York will always be a safe home.”