Eleven banks agreed to pay $63 million to settle allegations that they defrauded the Virginia Retirement System before the economic recession. It was the largest non-health care-related settlement for violations of the Virginia Fraud Against Taxpayers Act.
The state alleged that the banks misrepresented the quality of the residential mortgage-backed securities sold during the real estate boom. The state sued for $383 million in damages in total, including $250.66 million in losses from sold toxic mortgage-backed securities.
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The settlement stems from a lawsuit filed against the banks in 2014 by a whistle-blower — a company called Integra, a financial analysis and modeling firm in Texas. The state attorney general’s office subsequently intervened and took over the case on behalf of the state and the VRS.
In settling, the banks admitted no liability, and the state has dismissed the claims against them.
The whistle blower will receive 25 percent of the settlement. The VRS will get the remaining amount after paying legal fees, a spokesman for Herring said Friday.
The VRS generates about two-thirds of its total funds from investment income.
Photo by Joe Gratz via Flickr CC License
