NEW YORK: The Justice Department brought civil fraud charges Monday against a former Deutsche Bank executive over alleged misrepresentations on more than $1 billion in mortgage-backed securities sold ahead of the 2008 financial crisis.
US prosecutors are seeking an unspecified civil penalty from Paul Mangione, former Deutsche Bank head of sub-prime trading, charging that he misrepresented the quality of loans backing a pair of securities worth a total of $1.4 billion.
Mangione “falsely represented” that Deutsche Bank had strict underwriting guidelines and a strict monitoring process for the securities, US officials said. Pension plans, financial institutions and religious organizations suffered “significant” losses as a result.
“This individual knowingly took steps during the lead up to the financial crisis to sell defective mortgage loans while hiding the poor quality of the loans from investors,” said Rene Febles, deputy inspector general for investigations at the Federal Housing Finance Agency.
The case is connected to a $7.2 billion settlement with Deutsche Bank over mortgage-backed securities announced in January, the Justice Department said.