Citigroup, Ally sued for racketeering

Readers should understand that under RICO laws, assets of the accused can be seized. RICO laws were enacted to prosecute organized crime syndicates.

The implication is that the mortgage-back securities and associated derivatives are worthless, as home borrowers default en masse, with no recourse. There is no collateral backing the mortgages, the collateralized debt obligations, or the credit default derivative swaps. No one knows who owns the mortgages, and hence, investors of the synthetic derivatives own worthless paper. Banks, insurers, pension funds, institutional and sovereign funds are included as investors of these toxic assets.

Yet, markets still ignore these machinations. Once reality hits, we'll see a re-run of the banking crisis of 2008, only bailouts won't be on the menu. Or will they?


http://www.bloomberg.com/news/2010-10-04/citigroup-ally-sued-by-homeowners-alleging-racketeering-over-mortgages.html

Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans.

The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

The homeowners claim the defendants filed or caused to be filed mortgages with forged signatures, filed foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages.

The Kentucky suit claims MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime.

“RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

The suit, which includes claims of fraud, also names as defendants other banks, real-estate law firms and document- processing companies.