WICHITA, Kan. NCUA asked a federal appeals court for an expedited review of last month’s lower court ruling dismissing $550 million in claims against Barclays Capital, saying unless the ruling is overturned it could lead to the dismissal of more than $5.2 billion of claims against Wall Street banks for the failure of five corporate credit unions.
NCUA told the Tenth Circuit Court of Appeals the Barclays claims should not have been dismissed for being filed too late because Barclays, as did a half dozen other Wall Street banks, signed so-called tolling agreements agreeing to stop the clock on the statute of limitations during settlement negotiations. “The district court’s judgment rests on its legal conclusion that (Barclays) could argue that NCUA’s actions were untimely despite having entered into a tolling agreement in which they promised not to do so-an agreement into which Barclays freely entered during settlement negotiations in which it was assisted by sophisticated counsel,” wrote David Frederick, a Washington lawyer representing NCUA on its nine corporate suits.
Tolling agreements with other Wall Street banks, including Citicorp, HSBC and Deutsche Bank, allowed the two sides to successfully negotiate out-of-court settlements over the failure of the corporates and avoid litigation, NCUA said. NCUA has filed nine separate civil suits against Wall Street for the sale of MBS that eventually went bad and prompted the failure of the five corporates: U.S. Central FCU, WesCorp FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU.
NCUA said the ruling by the U.S. District Court of Kansas—where U.S. Central was based-will go a far way to determining suits against at least four other Wall Street banks that also negotiated and signed tolling agreements but have now disavowed those agreements. “Combined with this one, those four actions involve the purchase of more than $7.8 billion in (mortgage-backed securities) by now-defunct credit unions,” wrote the NCUA lawyer. “The district court’s ruling as to the tolling agreements will likely lead to the dismissal of more than $5.2 billion of those total purchases.”
He urged the court to expedite the Barclays appeal because of its potential impact on the other cases against Credit Suisse, UBS, Bearn Stearns and Washington Mutual, both now part of JP Morgan. NCUA also has pending claims against JP Morgan Chase, RBS Securities and Goldman Sachs. Discovery in the other cases, argued Frederick, cannot proceed until the question of the tolling agreements is resolved.
NCUA said the Wall Street banks all signed separate tolling agreements in which they agreed the three-year federal statute of limitations on securities claims would not run during the tolled period. However, in their defenses, the Wall Street banks reversed course and argued the clock continued to run during the tolling period, according to NCUA. The lower court agreed and dismissed all of the Barclays claims and a significant portion of claims against other banks.