1st Circuit Reinstates Lawsuit Against Moody’s
The First Circuit Court of Appeals has reinstated the $5.9 billion residential mortgage-backed securities fraud case brought by the Federal Home Loan Bank of Boston against Moody’s Investor’s Service, Inc. and Moody’s Corp. The bank claims that the credit rating agency knowingly issued false ratings on certain RMBSs that it had purchased.
A district court judge in Massachusetts had dismissed the lawsuit citing lack of personal jurisdiction. The judge also held that the court could not move the lawsuit to a different court where jurisdiction would be proper because cases dismissed for lack of jurisdiction could only be transferred if the dismissal was for lack of subject matter jurisdiction, not personal jurisdiction.
Now the First Circuit has vacated that ruling and found that transferring a case that has dismissed for lack of personal jurisdiction is also allowed. It is moving the RMBS case to the district court, which will decide whether to move the case to New York.
Former Barclays Trader Pleaded Guilty to Libor Rigging
According to prosecutors in the U.K., ex-Barclays Plc. (BARC) trader Peter Johnson pleaded guilty to conspiracy to manipulate the London interbank offered rated in 2014. The government announced the guilty plea this week after lifting a court order that had prevented the plea from being reported until now. The disclosure comes as the criminal trial against five of Johnson’s former Barclays co-workers into related allegations is underway.
The defendants on trial are Jay Merchant, Stylianos Contogoulas, Alex Pabon, Ryan Reich, and Jonathan Matthew. They have pleaded not guilty to the charge of conspiracy to commit fraud. The U.K.’s serious fraud office claims that the men acted dishonestly when they turned in or asked others to submit rates for Libor.
Ex-CEO enters Guilty Plea to Conspiracy to Commit Bank Fraud
Christopher Brent Jerrolds, the former CEO and president of Central Bank, has pleaded guilty to one count of conspiracy to commit bank fraud. Jerrolds is accused of, from ’09 until ’12, giving special treatment to Tennessee Materials Corp., which caused Central Bank, First Metro Bank, and Wayne County Bank to lose over $9M.
Jerrolds let TMC deposit checks that were insufficiently funded into the corporation’s account at Central Bank. These bad checks were supposed to cover overdraft balances. Instead, what would happen is that when a “bad check” in TMC’s account was sent back due to inadequate funds, another “bad check” would be used to replace the check. By mid-October in 2010, Jerrolds allegedly was responsible for accepting and approving 161 “bad checks” connected to TMC’s account. TMC was able to these bad checks to withdraw about $3.9M from Central Bank.
In 2011, Jerrolds issued an over $1M advance to TMC without the board’s approval or knowledge. He also released $500K that Central Bank had been holding as security to TMC even though the latter hadn’t made any loan payments and the board had not approved the action. The following year, Jerrolds gave letters of credit to TMC in amounts totaling over $3.7M but hid the transactions from his employer. TMC then used the letters as collateral to get a loan of $2M from Wayne County Bank and a loan of over $1.7M from First Metro Bank.
The SSEK Partners Group is an institutional investor fraud law firm. We also work with high net worth individual investors.
1st Circuit revives FHLBank Boston’s fraud lawsuit against Moody’s, Reuters, May 3, 2016
Ex-Barclays Trader Johnson Pleaded Guilty to Libor Fixing, Bloomberg, May 11, 2016
Former Savannah CEO pleads guilty to $9M bank fraud, The Jackson Sun, May 11, 2016