Morgan Stanley 2015 Annual Report Download - page 31

In May 2014, the California Attorney General’s Office (“CAAG”), which is one of the members of the RMBS Working
Group, indicated that it has made certain preliminary conclusions that the Company made knowing and material
misrepresentations regarding RMBS and that it knowingly caused material misrepresentations to be made regarding the
Cheyne SIV, which issued securities marketed to the California Public Employees Retirement System. The CAAG has
further indicated that it believes the Company’s conduct violated California law and that it may seek treble damages,
penalties and injunctive relief. The Company does not agree with these conclusions and has presented defenses to them to the
CAAG.
In October 2014, the Illinois Attorney General’s Office (“ILAG”) sent a letter to the Company alleging that the Company
knowingly made misrepresentations related to RMBS purchased by certain pension funds affiliated with the State of Illinois
and demanding that the Company pay ILAG approximately $88 million. The Company and ILAG reached an agreement to
resolve the matter on February 10, 2016.
On January 13, 2015, the New York Attorney General’s Office (“NYAG”), which is also a member of the RMBS Working
Group, indicated that it intends to file a lawsuit related to approximately 30 subprime securitizations sponsored by the
Company. NYAG indicated that the lawsuit would allege that the Company misrepresented or omitted material information
related to the due diligence, underwriting and valuation of the loans in the securitizations and the properties securing them
and indicated that its lawsuit would be brought under the Martin Act. The Company and NYAG reached an agreement to
resolve the matter on February 10, 2016.
On February 25, 2015, the Company reached an agreement in principle with the United States Department of Justice, Civil
Division and the United States Attorney’s Office for the Northern District of California, Civil Division (collectively, the
“Civil Division”) to pay $2.6 billion to resolve certain claims that the Civil Division indicated it intended to bring against the
Company. That settlement was finalized on February 10, 2016.
Civil Litigation.
On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against the Company and another
defendant in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v. Morgan Stanley &
Co. Inc., et al. The amended complaint, filed on September 28, 2010, alleges that defendants made untrue statements and
material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts
containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by the Company was
approximately $233 million. The complaint raises claims under the Washington State Securities Act and seeks, among other
things, to rescind the plaintiff’s purchase of such certificates. By orders dated June 23, 2011 and July 18, 2011, the court
denied defendants’ omnibus motion to dismiss plaintiff’s amended complaint and on August 15, 2011, the court denied the
Company’s individual motion to dismiss the amended complaint. On March 7, 2013, the court granted defendants’ motion to
strike plaintiff’s demand for a jury trial. The defendants’ joint motions for partial summary judgment were denied on
November 9, 2015.
On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against the Company and other
defendants in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Deutsche
Bank Securities Inc. et al. An amended complaint, filed on June 10, 2010, alleges that defendants made untrue statements and
material omissions in connection with the sale to plaintiff of certain mortgage pass-through certificates backed by
securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to plaintiff by the
Company was approximately $276 million. The complaint raises claims under both the federal securities laws and California
law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. On August 11, 2011, plaintiff’s
federal securities law claims were dismissed with prejudice. On February 9, 2012, defendants’ demurrers with respect to all
other claims were overruled. On December 20, 2013, plaintiff’s negligent misrepresentation claims were dismissed with
prejudice.
On July 15, 2010, The Charles Schwab Corp. filed a complaint against the Company and other defendants in the Superior
Court of the State of California, styled The Charles Schwab Corp. v. BNP Paribas Securities Corp., et al. The second
amended complaint, filed on March 5, 2012, alleges that defendants made untrue statements and material omissions in the
sale to one of plaintiff’s subsidiaries of a number of mortgage pass-through certificates backed by securitization trusts
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