Virginia Attorney General Mark R. Herring on Tuesday announced a $1.15 billion lawsuit against 13 of the nation’s biggest banks, accusing them of misleading a state retirement fund about the quality of bonds made up of residential mortgages, the Washington Post reported yesterday. The lawsuit, unsealed in Richmond Circuit Court, is the largest financial fraud action ever brought by the state of Virginia. It mirrors legal actions being taken across the country by attorneys general seeking redress for state pension funds that were ravaged by the financial crisis. Herring said that the banks — including JPMorgan Chase, Citigroup and Credit Suisse — knowingly packaged faulty home loans into securities they sold to the Virginia Retirement System (VRS). The pension fund, which counts 600,000 members on its rolls, purchased 220 residential-mortgage-backed securities starting in 2004. When the financial markets tanked and the value of those bonds took a nose dive, the fund was forced to sell the vast majority of the securities and lost $383 million.
