New Mexico settles lawsuit with seven financial firms

The state of New Mexico Monday reached a $32.5 million settlement with seven financial institutions. The institutions are Barclays Capital, Citigroup Global Markets, Goldman Sachs & Co., J.P. Morgan Securities, Merrill Lynch, Pierce, Fenner & Smith, NatWest Markets Securities, and Washington Mutual Mortgage Securities Corp. A class-action lawsuit, filed by the state earlier this year, alleged that the financial institutions manipulated prices of mortgage-backed securities purchased by state pension funds from 2003 to 2010. The lawsuit against the institutions had alleged a 15-year pattern of manipulating the prices of complex financial instruments called credit default swaps. As per the settlement, $24 million will return to New Mexico public employee pension funds. State Attorney General Hector Balderas announced the settlement Monday. As per the case, the New Mexico State Investment Council suffered losses.

Artificial manipulation

It alleged that the banks conspired to artificially manipulate the auction price of the financial instruments. It was in violation of the Sherman Anti-Trust Act, the state pointed out. According to the lawsuit, the State Investment Council invests around $31 billion in permanent endowments for the state. The suit, filed June 30, in U.S. District Court of New Mexico on behalf of the State Investment Council. It was filed by the Attorney General’s Office and Kirby McInerney LLP, a New York law company. Balderas said: “I am that grateful to Sen. Joseph Cervantes, D-Las Cruces, and the state Legislature for giving us the legal tools to partner with citizen whistleblowers and allowing our office to recover over $24 million that we will return to educator and public employee pension funds in New Mexico.” The lawsuit was filed under the 2007 New Mexico Fraud Against Taxpayers Act. The whistleblower is entitled to 25 per cent of the total settlement amount. However, the institutions admitted no liability and the state dismissed the claims against them as part of the settlement.

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