The U.S. Department of Justice has filed a civil complaint in federal court against Paul Mangione, former Deutsche Bank Head of Sub-prime Trading, alleging that Mangione misrepresented the characteristics of loans backing two pre-recession residential mortgage-backed securities (RMBS) that Deutsche Bank sold to investors, resulting in hundreds of millions of dollars in losses.
The complaint charged that sale of the $1 billion ACE 2007-HE4 security and the $400 million ACE 2007-HE5 was accomplished by misleading investors about the quality of the loans backing the securitizations. The complaint also accused Mangione with misleading investors about the origination practices of Deutsche Bank’s wholly-owned subsidiary, DB Home Lending LLC, the primary originator of loans included in the deals.
“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 U.S. Attorney Bridget M. Rohde for the Eastern District of New York. “We will hold accountable those who seek to deceive the investing public through fraud and misrepresentation.”
In January 2017, the Department of Justice settled a related RMBS matter with Deutsche Bank. Neither Mangione nor Deutsche Bank responded publicly to the complaint.