Dutch Pension Scheme Sues Deutsche Bank Over Mortgage-Backed Securities

(September 8, 2011) — Stichting Pensioenfonds ABP, Europe’s second-biggest pension fund, has sued Deutsche Bank over securities.

The pension fund claimed it purchased residential mortgage-backed securities relying on the bank’s allegedly false and misleading statements, Bloomberg has reported. “ABP purchased securities that were far riskier than represented, backed by mortgage loans worth significantly less than represented, that had been made to borrowers who were much less creditworthy than had been represented,” according to the complaint obtained by the news agency.

The Dutch pension scheme asserted that as a result of making the purchases in 2006 and 2007, it suffered “substantial damages.”

Other institutional investors worldwide have been active in suing large banks over allegedly risky investments. In June, for example, the Pension Benefit Guaranty Corporation (PBGC) demanded $25 million in damages from Morgan Stanley Investment Management over the firm’s handling of risky pension investments for a New York hospital system, showcasing the agency’s efforts to go after Wall Street banking giants in the wake of the financial crisis.

The Securities and Exchange Commission was accused last month of hiding wrongdoings of financial giants such as Deutsche Bank, along with Goldman Sachs Group, Wells Fargo, Bank of America, Lehman Brothers, SAC Capital Advisors, and Bernard Madoff Investment Securities. Senator Chuck Grassley (R., Iowa) asked the SEC to account for serious allegations that case-related document destruction may have compromised enforcement in cases involving activity at large banks and hedge funds during the financial crisis.

“From what I’ve seen, it looks as if the SEC might have sanctioned some level of case-related document destruction,” Grassley said in a statement. “It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what timeframe, and to what extent its actions were consistent with the law.”