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Morgan Stanley has announced that the office of New York Attorney General Eric Schneiderman is planning to file a lawsuit against the company in regard to its securitization of sub-prime mortgages in the period leading up to the 2008 economic crash.
The company called attention to the pending lawsuit on page 38 of its 327-page 10-K regulatory filing with the U.S. Securities & Exchange Commission (SEC).
“On Jan. 13, 2015, the New York Attorney General’s Office (NYAG), which is also a member of the RMBS Working Group, indicated that it intends to file a lawsuit related to approximately 30 sub-prime securitizations sponsored by the company,” said Morgan Stanley in its filing. “The NYAG indicated that the lawsuit would allege that the company misrepresented or omitted material information related to the due diligence, underwriting and valuation of the loans in the securitizations and the properties securing them and indicated that its lawsuit would be brought under the Martin Act. The company does not agree with NYAG’s allegations and has presented defenses to them to NYAG.”
The Web site for Attorney General Schneiderman’s office made no mention of any planned lawsuit. In fact, Schneiderman’s office, which turns out numerous press statements per week, has not issued any press releases that mention Morgan Stanley for several years.
This is the second time in a week that Morgan Stanley used its regulatory filings to announce legal issues. Last week, the company said it reached an agreement in principle with the federal government to resolve allegations relating to its handling of mortgage bonds prior to 2008.