New York's Retirement Fund Settles Securities Suit Against National City Corporation

(August 9, 2011) — The $146.5 billion New York State Common Retirement Fund (CRF) has settled a security fraud class-action lawsuit for $168 million.

The suit — against National City Corporation — stems from investment losses, as CRF claims the firm misrepresented the quality of its mortgages and home equity loans, minimizing the severity of losses.

“This is a good result for the fund and the more than one million fund members who rely on these investments,” said State Comptroller Thomas DiNapoli, trustee of the fund and lead plaintiff in the class action.

A statement released by DiNapoli states that during the period in question, National City, which held more than $48 billion in residential real estate loans, was one of the largest financial holding companies in the United States. The complaint was filed in the United States District Court for the Northern District of Ohio in 2008.

In January, DiNapoli’s office also announced the $4.25 million settlement of a securities fraud lawsuit against Merrill Lynch & Co. Based on court documents filed in July in US District Court in New York, the defendants attempted to hide the extent of the company’s involvement in risky subprime mortgage-backed securities, artificially inflating the value of the stock. The result: Major investor losses once the firm’s risky subprime exposure became apparent. The settlement additionally covers two former Merrill executives — company officials E. Stanley O’Neal and Jeffrey N. Edwards.

“The Fund was misled about the extent of Merrill Lynch’s participation in the subprime mortgage fiasco; that is unacceptable,” said DiNapoli in a statement. “I am responsible for protecting the secure retirement of more than one million system members, and I take that duty seriously. I am confident that this settlement makes up for a large part of the Fund’s losses. This sends a message that we will always fight to protect the best interests of our members.”

In 2010, CRF negotiated a $624 million settlement in a class-action securities fraud suit against Countrywide Financial Corporation in 2010.