Another puzzle piece has been placed in the government’s ongoing quest to hold banks accountable for their misdeeds in the 2008 financial crisis, and this piece is a crucial one: the role of Royal Bank of Scotland Group PLC (RBS).
On Feb. 19, RBS officials announced that the company had reached a $275 million settlement with the U.S. government to resolve allegations of misleading investors in mortgage-backed securities. The settlement is the third-largest settlement in the U.S. class action against banks packaged and sold mortgage securities.
“To get a settlement like this, we think it’s a solid result,” said Steven Toll, a lawyer from Cohen Milstein Sellers & Toll who represented RBS in the case, in a statement. He also added that the result “should not be seen as indicative” of how other similar cases against the bank would be resolved.
The particular case in question was originally filed in 2008 by New Jersey Carpenters Health Fund and the Boilermaker Blacksmith Pension Trust. The suit accused RBS and others of violating U.S. securities law by packaging and selling an estimated $25.39 billion of securities in 14 separate offerings to linked to the Harborview Mortgage Loan Trusts. These mortgage loans did not meet underwriting guidelines, a fact the suit says RBS concealed. The loans later sank to junk status.
Reuters reports that the only settlements over mortgage-backed securities that have been larger so far are the $500 million settlement reached by Bank of America concerning its Countrywide division and the $315 million settlement also reached by Bank of America concerning its Merrill Lynch division.
RBS surely saw this settlement coming on the company radar. In January, they announced that eight of their top officials would not be receiving their 2013 bonuses as a direct result of the financial crisis. RBS also had increasingly been the subject of U.S. governmental attention after a court ruled that the company repeatedly failed to adhere to sanction programs between 2002 and 2011, resulting in a $100 million penalty.
For more on the legal fallout from the financial crisis, check out these InsideCounsel articles: