Tags: new york | court | martin | credit | suisse case

New York's Top Court Narrows Martin Act in $11B Credit Suisse Case

New York's Top Court Narrows Martin Act in $11B Credit Suisse Case
(Andrey Popov/Dreamstime)

Tuesday, 12 June 2018 12:31 PM

New York’s highest court on Tuesday curbed the state attorney general’s ability to fight fraud on Wall Street, awarding a victory to Credit Suisse Group AG as it tries to end an $11 billion lawsuit over risky mortgage securities.

Reversing a lower court ruling, the state Court of Appeals said claims under the Martin Act, a 1921 law giving the attorney general broad power to pursue civil and criminal cases over securities fraud, must be brought within three years of the alleged wrongdoing, not six years.

“The Martin Act imposes numerous obligations - or ‘liabilities’ - that did not exist at common law, justifying the imposition of a three-year statute of limitations,” Chief Judge Janet DiFiore wrote.

Tuesday’s 4-1 decision could doom a November 2012 lawsuit brought by then-Attorney General Eric Schneiderman accusing Credit Suisse of lying about the quality of loans underlying residential mortgage-backed securities it sold in 2006 and 2007, resulting in steep investor losses during the global financial crisis.

But the appeals court gave Schneiderman’s successor, Barbara Underwood, a chance to show a lower court that Credit Suisse committed fraud under common law, subjecting it to a six-year statute of limitations under the state’s Executive Law.

The lawsuit had accused Credit Suisse of concealing known defects in home loans underlying its securities in a bid to sell more securities and generate higher fees.

Two lower courts rejected the bank’s argument that New York waited too long to sue. Underwood took over the case after Schneiderman resigned last month.

“This decision will have no impact on our efforts to vigorously pursue financial fraud wherever it exists in New York,” said Amy Spitalnick, a spokeswoman for Underwood. “That includes continuing our case against Credit Suisse.”

Credit Suisse spokeswoman Nicole Sharp said the Swiss bank was “extremely pleased” to defeat the Martin Act claim, and that the three-year statute of limitations was significant “for all future industry proceedings.”

Credit Suisse will keep defending itself against the attorney general’s “unfounded and meritless allegations,” she said.

Judge Jenny Rivera dissented from Tuesday’s decision. She called on New York’s legislature to restore the six-year statute of limitations “before significant damage is done to the state’s securities markets.”

The Martin Act gained new life under former Attorney General Eliot Spitzer, who invoked it in 2005 when he sued American International Group Inc’s (AIG.N) longtime chairman Maurice “Hank” Greenberg over two alleged sham reinsurance transactions.

Schneiderman also invoked it when he began probing whether Exxon Mobil Corp. misled the public about climate change.

The case is People v Credit Suisse Securities (USA) LLC, New York State Court of Appeals, No. 40.

© 2018 Thomson/Reuters. All rights reserved.

   
1Like our page
2Share
Economy
New York State's highest court on Tuesday narrowed the reach of a powerful law used by the state's attorney general to fight financial fraud, handing a partial victory to Credit Suisse Group AG in an $11 billion lawsuit over defective mortgage securities.
new york, court, martin, credit, suisse case
436
2018-31-12
Tuesday, 12 June 2018 12:31 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved