Attorney General Xavier Becerra Announces $125 Million Settlement Against Royal Bank of Scotland For Misleading California’s Pension Funds
SACRAMENTO – Attorney General Xavier Becerra today announced a $125 million settlement with the Royal Bank of Scotland (RBS), an international financial conglomerate, over misrepresentations about residential mortgage-backed securities sold to California's public employee and teacher pension funds, CalPERS and CalSTRS, respectively. Mortgage-backed securities are complex investments which include thousands of mortgage loans of potentially varying quality, where the buyer typically relies on assurances that the loans have been carefully screened and are not too risky.
An investigation conducted by the Attorney General's Office found that the descriptions of these mortgage-backed securities to investors failed to accurately disclose the true characteristics of many of the underlying mortgages, and that due diligence to remove poor quality loans from the investments was not adequately performed. RBS was aware of the misrepresentations but failed to correct them. This resulted in millions in losses to CalPERS and CalSTRS.
“RBS decided to mislead California’s pension funds in order to line its own pockets – plain and simple,” said Attorney General Becerra. “Today’s settlement returns to our pension funds, which hardworking Californians rely on upon retirement, money that RBS wrongfully took from them.”
The settlement with RBS is the latest action by the California Department of Justice to recover losses suffered during the financial crisis and to hold accountable the institutions that contributed to it.
To date, the Attorney General's Office has recovered over $1 billion for California’s public pension funds. In January 2017, the Attorney General's Office announced the recovery of $150 million from rating agency Moody's, and in February 2015, the Attorney General's Office recovered $210 million from rating agency Standard & Poor's and its parent, McGraw-Hill Financial Inc. The Attorney General's Office previously recovered $300 million from Bank of America, $102 million from Citigroup Inc., and $300 million from J.P. Morgan Chase & Co., as well as hundreds of millions of dollars’ worth of consumer relief from these settlements.