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Corporate & Securities Law
: FinancialCounselMorgan Stanley Sued Over STACK 2006-1 CDO Investment
By James Eccleston
Morgan Stanley was sued by Taipei-based China Development Industrial Bank for fraud to recover losses from an investment tied to residential mortgage-backed securities.
The Taiwanese bank claims Morgan Stanley made an investment linked to U.S. subprime mortgage bonds in mid-2006 and, after learning of problems with it, "dumped those losses" on CDIB in April 2007.
"Morgan Stanley structured and sold CDIB a security that was a house of cards built on a shoddy foundation of fraudulently manipulated credit ratings," according to CDIB.
CDIB claims it was fraudulently sold a $275 million interest in what the bank called the STACK 2006-1 Ltd., a hybrid collateralized debt obligation. CDOs are pools of assets such as mortgage bonds packaged into new securities.
SNSFE is investigating the STACK 2006 transaction. Those with information should feel free to contact attorneys at SNSFE.
Source: Bloomberg
Full post as published by FinancialCounsel on October 01, 2010 (boomark / email).
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