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UBS Will Pay $1.435 Billion to Settle Allegations Regarding False Information  

UBS AG and several U.S. affiliates will pay $1.435 billion in penalties to settle a civil action filed in November 2018. The case alleged misconduct in UBS’ issuance of residential mortgage-backed securities (RMBS) in 2006 and 2007. The settlement will result in the dismissal of the complaint. This marks the final case addressed by a Department of Justice Working Group investigating RMBS activities leading up to the 2008 financial crisis.

The United States had filed a complaint stating that UBS knowingly made false statements regarding the characteristics of the mortgage loans supporting the RMBS. The complaint invoked the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), citing violations of mail, wire, and bank fraud statutes. FIRREA has a whistleblower component entitling individuals up to $1.6 million dollar in whistleblower rewards.  If the case had a dual SEC whistleblower component and if a whistleblower was the impetus for the case the SEC whistleblower could be entitled up to 30% as an SEC whistleblower award which is several hundred million dollars.

Officials including Breon Peace, United States Attorney for the Eastern District of New York, and Vanita Gupta, United States Associate Attorney General, announced the settlement. The complaint asserted that a significant number of loans behind the RMBS did not adhere to proper underwriting guidelines. UBS was also alleged to have known about unsupported property values and loans not compliant with consumer protection laws.

The resolution brings the Department of Justice’s collection to more than $36 billion in penalties from banks, originators, and rating agencies involved in RMBS-related actions. This includes settlements with major institutions like Bank of America, Citigroup, and Goldman Sachs. The cases were managed by various U.S. Attorney’s Offices and the Civil Division, collaborating with the RMBS Working Group, which focused on investigating pre-crisis financial fraud in the RMBS market.

The UBS settlement concludes the RMBS Working Group’s cases handled by the U.S. Attorney’s Office of the Eastern District of New York, recovering over $11 billion in penalties across six cases. The claims settled remain allegations without established liability.

E.D.N.Y. Docket No. 18-CV-6369