Justice Department charges ex-Deutsche Bank subprime trader with civil fraud

[Eugene]

Source: Reuters

#U.S. SEPTEMBER 11, 2017 / 5:51 PM / UPDATED AN HOUR AGO

Justice Department charges ex-Deutsche Bank subprime trader with civil fraud

Reuters Staff
1 MIN READ

WASHINGTON (Reuters) - The U.S. Justice Department on Monday charged Deutsche Bank’s (DBKGn.DE) former head of subprime mortgage trading with civil fraud in connection with conduct dating back to the 2007-2009 financial crisis.

Paul Mangione, the former trader, is accused in the complaint of misrepresenting information about the loans underpinning two residential mortgage-backed securities that were sold to investors.

The government’s case against the former trader came after the bank in January reached a $7.2 billion settlement in a related case over risky mortgage securities sold to investors.

Reporting by Sarah N. Lynch; Editing by Jonathan Oatis

http://www.reuters.com/article/us-deutsche-bank-mortgages-enforcement/justice-department-charges-ex-deutsche-bank-subprime-trader-with-civil-fraud-idUSKCN1BM2PW

[dixiegrrrrl]

1. I find it hard to believe that Sessions will cause that bank any loss of sleep.

There's a 100 ways to sound tuff in the headlines, without really doing anything seriously punative about the bank's illegal games.

[Pachamama]

2. I am pretty certain this is a separate issue from the settlement agreement which was not for 7.2 Bil

[nitpicker]

3. From the DoJ PR

https://www.justice.gov/usao-edny/pr/united-states-files-civil-fraud-complaint-against-former-deutsche-bank-head-subprime

(snip)
BROOKLYN – The United States today filed a civil complaint in federal court in Brooklyn, New York, against Paul Mangione, former Deutsche Bank head of subprime trading. In its complaint, the United States alleges that Mangione engaged in a fraudulent scheme to misrepresent the characteristics of loans backing two residential mortgage-backed securities (RMBS) that Deutsche Bank sold to investors that resulted in hundreds of millions of dollars in losses. This suit is brought pursuant to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and seeks an appropriate civil penalty.
(snip)

As alleged in the complaint, Mangione engaged in a fraudulent scheme to sell ACE 2007-HE4 (“HE4”) -- a $ 1 billion security -- and ACE 2007-HE5 (“HE5”) -- a $400 million security -- by misleading investors about the quality of the loans backing the securitizations. The complaint further alleges that Mangione also misled investors about the origination practices of Deutsche Bank’s wholly-owned subsidiary, DB Home Lending LLC (DB Home) (f/k/a Chapel Funding, LLC), which was the primary originator of loans included in the deals. Mangione approved offering documents for HE4 and HE5 even though he knew they misrepresented key characteristics of the loans, including compliance with lending guidelines, borrowers’ ability to pay, borrowers’ fraud and appraisal accuracy.

The HE4 and HE5 offering documents also falsely represented that DB Home had “developed internal underwriting guidelines that it believe[d] generated quality loans” and that DB Home had instituted a quality control process that “monitor[ed] loan production with the overall goal of improving the quality of loan production,” among numerous other representations designed to instill in investors trust in DB Home’s underwriting processes. As alleged in the complaint, Mangione knew that these statements were false.

“The defendant fraudulently induced investors, including pension plans, religious organizations, financial institutions and government-sponsored entities, to name only a few, to invest nearly a billion and a half dollars in HE4 and HE5 RMBS, and caused them to suffer extraordinary losses as a result,” stated Acting United States Attorney Rohde. “We will hold accountable those who seek to deceive the investing public through fraud and misrepresentation.”
(snip)