Daily Archives: July 24, 2014

Update on state AG/regulator lawsuits using Dodd-Frank authority

We have been following four lawsuits brought by state Attorneys General and a state regulator using their Dodd-Frank enforcement authority. Under Dodd-Frank Section 1042, a state AG or regulator is authorized to bring a civil action for a violation of the Dodd-Frank prohibition of unfair, deceptive or abusive acts or practices (UDAAP). Here’s an update on the lawsuits:

Mississippi. The most recent of the four lawsuits was filed in May 2014 by the Mississippi AG against Experian in Mississippi state court alleging widespread federal and state law violations. (While the AG’s complaint did not expressly allege that his claim of alleged UDAAP violations by Experian was brought under Section 1042, his complaint seeks various remedies under Dodd-Frank Section 1055 (12 U.S.C. 5565).)

In June 2014, Experian removed the case to a federal district court in Mississippi. It filed an answer to the complaint on June 20 and on July 10, the AG filed an amended complaint which includes new allegations regarding deceptive marketing practices by Experian.

Illinois. The Illinois AG has filed two lawsuits using her Section 1042 authority. In March 2014, the Illinois AG filed a state court lawsuit against a small loan lender alleging violations of the Dodd-Frank UDAAP prohibition as well as state law violations. On July 16, 2014, the lawsuit was dismissed for lack of prosecution.

The Illinois AG’s second use of Section 1042 was in a lawsuit initially filed in state court against a for-profit college and its owners. In March 2014, the state court granted the AG’s motion to further amend her complaint to add new counts alleging that the defendants’ practices were unfair and abusive under Dodd-Frank and in May 2014, the defendants (as we predicted) removed the case to a federal district court in Illinois.

Read on.

Ex-Homeowners, Not Bank, Get Foreclosure Surplus

In a residential foreclosure case that could have larger consequences, the Third District Court of Appeal ruled Wednesday that a couple whose home was lost to foreclosure should have received the money left over after its sale.

In the ruling reversing Miami-Dade Circuit Judge Diane Ward, the appellate court ordered $99,500 to be returned to Miami residents Walter and Eider Pineda. The court cited the case as a “cautionary tale to bidders at foreclosure sales.”

The case involved a couple whose home was sold at a foreclosure auction in March 2013. The Pinedas had two mortgages—one from Wells Fargo and the other from Florida Bankers Realty LLC.

Their home was purchased by Nocari Investments LLC for $184,000. After satisfying the Florida Bankers judgment, a surplus of $99,500 remained.

In November 2013, Nocari filed a motion with Miami-Dade Circuit Court for disbursement of the surplus to Wells Fargo. The Pinedas also filed a motion for the funds.

Nocari argued the Pinedas would be unjustly enriched by recouping the surplus funds since they filed for bankruptcy protection and received a discharge of their debt to the bank. The Pinedas would be getting a windfall if awarded the surplus, the company argued.

The Pinedas opposed Nocari’s motion, arguing third-party purchasers such as Nocari are not entitled to direct surplus funds.

Read more: http://www.dailybusinessreview.com/id=1202664310286/ExHomeowners-Not-Bank-Get-Foreclosure-Surplus#ixzz38PuKZW80

Wells Fargo Loses Round In $164M IRS Refund Suit

Case Title

Wells Fargo & Company v. United States of America


Case Number




Nature of Suit



Patrick J. Schiltz

Law360, New York (July 22, 2014, 4:48 PM ET) — A special master on Monday deniedWells Fargo & Co.’s bid for summary judgment in its suit claiming the Internal Revenue Service owes it a $164 million tax refund because a complex transaction known as STARS was not a tax shelter, saying there is a clash in the factual record.
The denial quashes one of Wells Fargo’s eight motions in the case, which stems from a structured trust advantaged repackaged securities transaction involving a $1.25 billion loan from Barclays PLC. The IRS said the deal was essentially a tax shelter with no economic substance and denied the $164 million refund tied to it.

Wells Fargo motioned for the court to find that the transaction was motivated by an economic purpose, but the special master determined that this was still an issue of factual dispute.

“The parties have submitted contrary evidence with respect to the purpose of the transaction,” wrote Special Master Charles H. Gustafson. “As a result, the motion cannot properly be granted.”

Read on.

BofA To Pay $16.5M To Settle Alleged Sanctions Violations

Law360, New York (July 24, 2014, 11:59 AM ET) — Bank of America Corp. agreed to a more than $16.5 million settlement with the U.S. Department of the Treasury’s sanctions enforcement unit over allegations that the bank processed around 200 transactions for known drug traffickers subject to U.S. sanctions, the Treasury said Thursday.

The Office of Foreign Asset Control alleges that between September 2005 and March 2009, Bank of America NA processed 208 transactions totaling around $91,000 on behalf of 10 individuals on the agency’s list of specially designated nationals and blocked persons, or SDN list….

Source: Law 360


Update: Here is the settlement agreement. Click here.

Barclays : files to dismiss New York AG lawsuit against ‘dark pool’

Barclays Plc urged the dismissal on Thursday of a lawsuit from the New York attorney general alleging the bank lied to clients about its high-speed trading venue, saying the complaint had “fatal flaws” because Barclays’ customers were never misled.

The bank’s motion to dismiss the lawsuit against its private trading venue – or “dark pool” – said the attorney general failed to identify any fraud, and did not establish material misstatements, identify victims or actual harm.

Barclays said the lawsuit filed by Attorney General Eric Schneiderman had clear and substantial errors. Should litigation proceed, the bank said it would show how baseless the allegations are.

“The very marketing documents and e-mails from which the complaint selectively quotes, along with the complaint’s other fatal flaws, are sufficient to require dismissal of this ‘fraud’ action,” the motion said.


Read on.

Morgan Stanley : to pay $275 million penalty for misleading RMBS investors

The U.S. Securities and Exchange Commission said on Thursday it had charged Morgan Stanley with misleading investors about two residential mortgage-backed securities it issued before the 2008 financial crisis, and that the bank would pay $275 million to settle the case, according to a press release.

The SEC found Morgan Stanley had not given investors the correct information about how many of the mortgages they contained were delinquent, the release said.

The RMBS market reached $2.2 trillion in 2007 but a wave of mortgage defaults made the values of many of the securities plunge in 2008, causing the investment banks Bear Stearns and Lehman Brothers to collapse and eventually leading to a credit and liquidity crisis on Wall Street and a deep recession.

Read on.

Civilian Criminal Complaint to US Attorney Preet Bharara Against Members and Administration of the Moreland Commission

From March 2014.

From William Galison blogsite:

bharara moreland complaint


notarized moreland complaint bharara 2