(Nasdaq) US authorities sued a former executive of German bank Deutsche Bank AG for misleading investors about the residential loans backing $1.4 billion in mortgage-backed securities issued in 2007, prior to the 2008 financial crisis.
The Justice Department filed civil fraud charges against Paul Mangione, the former head of subprime mortgage trading at Deutsche Bank. The fraud resulted in hundreds of millions of dollars in losses, according to a fraud complaint filed in Brooklyn federal court. Mangione is accused of systematically, intentionally lying about subprime mortgages.
According to US officials, Mangione falsely represented that Deutsche Bank had strict underwriting guidelines and a strict monitoring process for the securities. Due to this, pension plans, financial institutions and religious organizations suffered significant losses.
Rene Febles, deputy inspector general for investigations at the Federal Housing Finance Agency, reportedly said, “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.”
The Justice Department noted that the case is connected to a $7.2 billion settlement with Deutsche Bank over mortgage-backed securities that was announced in January.