BArclays RMBS Complaint

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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UNITED STATES OF AMERICA, ex rel.
JOSEPH AMICO :
:
: FILED UNDER SEAL
Plaintiff/Relator, :
:
against :
: ________ CIV _________
BARCLAYS BANK PLC; SUTTON FUNDING :
LLC; BCAP LLC; BARCLAYS CAPITAL INC.; : COMPLAINT
BARCLAYS CAPITAL REAL ESTATE INC. :
:
:
: JURY TRIAL DEMANDED
Defendants.
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TABLE OF CONTENTS
Page
I. NATURE OF ACTION ............................................................................................................1
A. RELATOR’S INFORMATION ..............................................................................9
II. PARTIES ...............................................................................................................................15
A. THE PLAINTIFF ..................................................................................................15
B. THE RELATOR ....................................................................................................15
C. THE DEFENDANTS ............................................................................................15
D. THE NON-PARTY ORIGINATORS ...................................................................17
E. THE GOVERNMENT PURCHASERS................................................................17
III. JURISDICTION AND VENUE ...........................................................................................18
IV. CONDITIONS PRECEDENT .............................................................................................18
V. FACTS COMMON TO ALL COUNTS ...............................................................................20
A. MBS BACKGROUND .........................................................................................20
B. THE BARCLAYS RMBS PROCESS...................................................................22
C. THE BARCLAYS CDO PROCESS .....................................................................26
D. RELATOR’S LOAN-LEVEL NATIONWIDE REVIEW OF THE

BORROWERS AND COLLATERAL PROPERTIES UNDERLYING THE
BARCLAYS RMBS TRUSTS REVEALS FRAUD ............................................27
E. THE BORROWERS AND COLLATERAL PROPERTIES ................................31
F. DEFENDANTS FAILED TO TIMELY TRANSFER LOANS TO THE MBS

TRUSTS ................................................................................................................48
VI. DEFENDANTS’ USE OF FALSE RECORDS AND/OR STATEMENTS ........................51
A. DEFENDANTS MISREPRESENTED MATERIAL INFORMATION WITH

RESPECT TO THE MORTGAGE LOANS THAT COMPRISED THE MBS ...51
1. DEFENDANTS FALSELY CLAIMED THAT NO LTV or CLTV

RATIOS WERE ABOVE 100% ...............................................................56
B. DEFENDANTS AFFIRMATIVELY MISREPRESENTED PROPER

DELIVERY AND ASSIGNMENT OF LOAN DOCUMENTS...........................59
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C. THE CREDIT RATINGS WERE MATERIALLY FALSE .................................62
D. DEFENDANTS FAILED TO COMPLY WITH UNDERWRITING

GUIDELINES DESPITE REPRESENTING TO THE CONTRARY IN THE
OFFERING DOCUMENTS ..................................................................................63
E. DEFENDANTS OMITTED AND MISREPRESENTED MATERIAL

INFORMATION IN THE OFFERING DOCUMENTS FOR THE CDOS .........73
1. BARCLAYS PURCHASED CREDIT PROTECTION FROM AIG AND

SOLD CDOS TO MAIDEN LANE III .....................................................75
F. DEFENDANTS CONTROLLED AND DIRECTED EVERY STEP OF THE

SECURITIZATION PROCESS ............................................................................77
G. SALES OF RMBS TO AIG UNDER AIG’S SECURITIES LENDING

PROGRAM AND FALSE STATEMENTS MADE IN CONNECTION
THEREWITH ........................................................................................................79
VII. THE U.S. GOVERNMENT FUNDED THE PURCHASE OF MBS AND CDOS AND
SUFFERED SUBSTANTIAL LOSSES ...........................................................................81
A. PURCHASES BY THE U.S. GOVERNMENT....................................................81
B. DAMAGES TO THE U.S. GOVERNMENT IMPAIRED VALUE OF MBS .....82
1. IMPAIRED VALUE OF MBS ..................................................................82
2. IMPAIRED VALUE OF CDOS ...............................................................84
3. DAMAGE TO FANNIE MAE AND FREDDIE MAC ............................85
4. DAMAGES TO THE FAILED CREDIT UNIONS, THE FAILED

BANKS, THE FAILED PENSION PLANS .............................................86
5. DAMAGES FROM AIG BAILOUT ........................................................86
VIII. CLAIMS FOR RELIEF .....................................................................................................87
A. For Damages And Penalties Under The False Claims Act (31 U.S.C. § 3729(a)(1)
(2006), and, as amended, 31 U.S.C. § 3729(a)(1)(A)) ..........................................87
B. For Damages And Penalties Under The False Claims Act U.S.C. §
3729(a)(2)(2006), and, as amended, 31 U.S.C. § 3729(a)(1)(B)...........................89
C. For Damages And Penalties Under The False Claims Act (31 U.S.C. §
3729(a)(7)(2006), and, as amended, 31 U.S.C. § 3729(a)(1)(G)) .........................91
IX. PRAYER FOR RELIEF .......................................................................................................92
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X. DEMAND FOR TRIAL BY JURY.......................................................................................92
ANNEX A .....................................................................................................................................93
ANNEX B .....................................................................................................................................94
ANNEX C .....................................................................................................................................95
ANNEX D .....................................................................................................................................99
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The United States of America, by and through Joseph C. Amico as Relator, brings this
action against Defendants BARCLAYS BANK PLC (“BARCLAYS BANK”); SUTTON
FUNDING LLC (“SUTTON”); BCAP LLC (“BCAP”); BARCLAYS CAPITAL INC.
(“BARCLAYS CAPITAL”) and BARCLAYS CAPITAL REAL ESTATE INC. (“HOMEQ
SERVICING”)(collectively or individually, “Barclays” or “Defendants”) alleging as follows:
I. NATURE OF ACTION
1. This is an action under the False Claims Act (“FCA”) by the United States of
America, as related by Joseph C. Amico, to recover treble damages and civil penalties
under the False Claims Act, as amended, 31 U.S.C. §§ 3729 et seq. 1 arising from
Defendants’ creation and sale of certain residential mortgage-backed securities
(“RMBS,” or generally, “MBS”) and collateralized debt obligations (“CDOs”) and the
purchase of those securities using funds provided, insured, guaranteed or otherwise made
available by the United States Government (“US Government”). The MBS covered by
this Complaint are set forth in Annex A (Annex A is deemed to include all other MBS for
which Defendants served as underwriter/placement agent, but which are not listed in
Annex A). The CDOs covered by this Complaint are set forth in Annex B (Annex B is
deemed to include all other CDOs for which Defendants served as underwriter/placement
agent, CDOs for which Defendants purchased credit protection from AIG and received
proceeds from Maiden Lane III for the purchase of such CDOs, but which are not listed
in Annex B).
1
This action is brought pursuant to both the FCA as it stood prior to the enactment of the Fraud Enforcement and
Recovery Act of 2009 (the “FERA”) and the FCA as amended by the FERA. Defendants’ false and fraudulent
statements and/or omissions were made for the first time prior to 2009, have never been retracted or corrected, and
endure in form and effect to the present. This Complaint includes claims relating to the U.S. Government’s
financing, insuring, and guaranteeing of MBS and CDOs both before and after 2009.
2. All of the allegations contained in this Complaint are based on Relator’s direct
knowledge of Defendants wrongdoing. Relator gained this knowledge both from his
professional experience and from his discovery of Defendants’ mortgage loans and the
related collateral properties. Relator’s investigation and discovery of the loans and
properties on which the complaint is based requires a unique blend of relator’s experience
and knowledge of the mortgage security business and structured financial products. In
addition, to discover the loans and properties in the Defendants’ RMBS, relator had to
create and invent unique algorithms, methods, techniques, and strategies to find and
identify loans hidden from persons without Relator’s original and unique knowledge and
capability. The process was extremely lengthy and time consuming. After locating and
identifying loans and properties in Defendants’ RMBS, even more time was consumed
devising and creating a method of presenting the enormous amount of information in an
understandable form.
3. Relator was an employee of a competitor of Defendants during the period 2000-
2002. Through that employment, Relator came to know of the mortgage, mortgage
security, CDO and Credit Default Swap businesses, the various competitors and their
practices within each and the trends in each business. Relator gained knowledge of his
employer’s and its competitors practices for originating mortgages (directly and through
correspondents), creating mortgage securities, creating CDOs, writing and trading Credit
Defaults Swaps, and profiting from each business.
4. Relator learned of diminishing standards in the mortgage and mortgage security
businesses during mid-2002 when an executive from his employer’s mortgage security
group asked Relator for his help creating a competitive advantage by resolving tax issues
2
involving such mortgage securities. To perform this work task, Relator did a complete
analysis of the RMBS business, the competitors and its trends. Specifically, Relator
learned the details of the “whole loan” and “wholesale” mortgage business. Relator’s
work task made him aware that the creditworthiness of the mortgage borrowers and the
value of the collateral properties were secondary and tertiary considerations. To
paraphrase an executive of his employer: “we don’t care about the borrower or the
property since we aren’t holding the loan. We are packaging the loans into a security and
selling it as a blind pool to investors. We are only concerned about the volume. [This
particular originator] said he can deliver us 400 loans per month, which is all we are
concerned about.”
5. Relator learned of the packaging of unsellable securities (including RMBS
securities) into CDOs during 2000-2002 in his tenure in his employer’s CDO and Credit
Default Swap group (Structured Transactions). Relator’s business unit was involved in
the Enron transactions and when that business fell apart, the group quickly moved on to
creating CDOs from piles of unsellable securities (including RMBS). Unsellable
securities arose from a number of issues, including lack of liquidity or a market,
mispricing (too expensive or too cheap), undesirable credit, etc. The explosion in CDO
offerings began at the end of Relator’s tenure in the group and continued unchecked in
step with the growth of RMBS issuance. From this job, Relator knew of the activities of
his own group as well as the activities of most (if not all) of its competitors.
6. Relator learned of the RMBS business failing to transfer mortgage loans to RMBS
trusts around 2001. A former analyst of his employer made an off hand comment
[paraphrased] “Do you think mortgage security investors would be upset if they found
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out there were no mortgages in their mortgage-backed securities?” This prompted
Relator’s inquiry about the fledging use of MERS (mortgage electronic recording system)
and how mortgage transfers occurred “off the radar” of the county clerks, since no
mortgage loan assignments were recorded.
Department of Justice Asks Relator to be a “Whistleblower”
7. Based on information provided by Relator, the Department of Justice (“DOJ”)
approached Relator in January 2013 and asked him to be a whistleblower against at least
10 investment banks involved in the mortgage and RMBS businesses. At the time, the
DOJ, to paraphrase the Assistant US Attorney’s words, had nothing on them. This case is
a follow-on to that whistleblower request.
8. All of the allegations contained in this Complaint are derived from Relator’s
discovery and independent knowledge of the loans packaged into the Barclays RMBS (or
sold directly to Fannie Mae, Freddie Mac or one of a dozen or more investment banks
and financial institutions). Defendants intentionally concealed the name and address of
each individual borrower and the address of the collateral property. Defendants’ fraud
was accomplished by their concealment of the names of the borrowers and the addresses
of the collateral properties.
9. Relator advised DOJ of various means of corroborating the information he
supplied. These means included obtaining internal emails and Bloomberg
communications which would show Defendants’ employees were aware of un-
creditworthy borrowers, overvalued collateral properties and flawed execution (“flawed
mortgages”). Similarly, Relator advised the DOJ to obtain external due diligence reports
(e.g. Clayton Holdings, etc.) as well as internal reports, which all confirmed the
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Defendants’ awareness of the flawed mortgages (and intentional ignorance of them).
Further, Relator advised DOJ to obtain all emails and due diligence concerning
Defendants’ extension of “warehouse” credit lines to various mortgage originators, as
that also corroborates Relator’s information and Defendants’ awareness of the flawed
mortgages. Additionally, Relator advised DOJ to follow the internal organization of the
mortgage origination and RMBS packaging process for Defendants to further corroborate
Relator’s information and demonstrate Defendants’ awareness of the flawed mortgages.
Finally, Relator provided DOJ with names of dozens of potential witnesses among
Defendants’ current and former employees who could be interviewed to corroborate
Relator’s information and Defendants’ awareness of the flawed mortgages. DOJ used
Relator’s information and followed all of Relator’s recommendations.
10. Relator has provided DOJ with a number of novel and unique claims which have
not (to Relator’s knowledge) been the subject of prior public disclosure. These claims
include: (1) Defendants’ concealment of borrowers names and collateral property
addresses to effect their fraud2; (2) Defendants’ use of CDOs to expand the scope of their
fraud, by repackaging and selling flawed RMBS; (3) Defendants’ use of credit default
swaps to expand the scope of their fraud, by transferring the risk of flawed RMBS and
CDOs (containing flawed RMBS) to unsuspecting buyers; (4) by squeezing debtors (e.g.
AIG) under securities lending programs to obtain more collateral against flawed RMBS
Defendants sold to investors.
2
Relator’s primary claim is that Defendants orchestrated their fraud by concealing the names of borrowers and
addresses of collateral properties. This primary claim leads to a number of subsidiary claims which may have been
publicly disclosed, such as that Defendants lied about: (1) loan to value ratios; (2) occupancy or purpose of collateral
property; (3) debt to income ratios; (4) underwriting standards; and (5) ratings of the flawed RMBS. These
subsidiary claims are derivative of and secondary to the primary fraud Relator has uncovered; i.e. the subsidiary
claims further the main fraud but are not the main fraud themselves.
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11. Relator’s evidence demonstrates Defendants knowingly made false statements
and claims and omitted material information concerning the sale of RMBS and CDOs to
the U.S. Government. 3 Defendants’ offering documents and related sales materials
purportedly summarized and set forth the quality and condition of the borrowers and
properties which backed the RMBS and CDO securities. This complaint sets forth ample
sufficient evidence demonstrating the falsity of Defendants’ statements regarding the
RMBS and CDO securities on a loan-level basis. Relator’s investigation has revealed
that Defendants’ fraudulently induced purchasers by including information regarding
those borrowers and properties that was knowingly false. Relator is unaware of any
complaint that advances fact based allegations that explain precisely why and how
Defendants misled the U.S. Government and other purchasers of Barclays RMBS and
CDOs (with knowingly false statements in the offering documents or otherwise).
12. Defendants created and used false records and/or statements in connection with
the creation and sale of RMBS and CDOs and presented and/or caused to be presented
false or fraudulent claims for payment in connection therewith. Defendants’ false
statements and material omissions regarding their RMBS and CDOs have never been
retracted and have endured in form and effect to the present. Thus all financing,
guarantees, insurance, and payments associated with Defendants’ RMBS and CDOs were
made further to and in view of Defendants’ false statements.
3
As used herein, “sales of CDOs to the US Government” includes the sale of credit protection by AIG to Barclays
on the CDOs and the sales by Barclays to Maiden Lane III of the CDOs for which Barclays purchased credit
protection from AIG as described herein.
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13. Relator’s evidence demonstrates that, in connection with Defendants’ RMBS and
CDOs, Defendants acted with knowledge and/or reckless disregard for the truth in
making false statements and omitting material information from the offering documents.4
14. Contrary to Defendants’ public representations, Defendants knew or recklessly
disregarded that many of the borrowers responsible for paying back the loans that
securitized the Barclays RMBS were not creditworthy. Relator’s information reveals that
many of the properties included as collateral in the Barclays RMBS were overvalued by
Defendants. However, Defendants intentionally concealed this information from
purchasers by making false claims in the RMBS and CDO offering documents.
15. Furthermore, Defendants represented that the underlying mortgage loans
complied with specified underwriting standards – standards that Defendants recklessly
ignored.
16. Defendants also made representations and disclosures in the relevant offering
documents that significantly overstated the ability of the borrowers to repay the
underlying mortgage loans. Defendants made fraudulent statements regarding the
borrowers’ income and debt levels. Relator’s loan-level evaluation of the source
documents reveals that Defendants fraudulently misrepresented fundamental information
necessary for a potential investor to conduct a proper valuation of a mortgage backed
security.
17. Defendants intentionally concealed the names of the borrowers and the addresses
of collateral properties securing the loans so that purchasers, including the United States,
4
As used herein, “with reckless disregard” means “knowingly, with deliberate ignorance and/or with reckless
disregard.”
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could not conduct their own due diligence. Examination of the underlying loans shows
Defendants knew or recklessly disregarded that most of the borrowers were not
creditworthy. By concealing the name of a borrower, no one could determine a
borrowers’ ability to repay their mortgage loan(s). By concealing the address of a
collateral property, no one could determine whether it was adequate collateral for the
related loan. Instead, purchasers could rely only on Defendants’ representations (which
led purchasers to believe the borrowers were creditworthy and the properties adequate
collateral). Furthermore, Defendants represented that the underlying mortgage loans were
sound, when they were not. In addition, Defendants claimed the loans complied with
specified standards, when they did not.
18. Also, contrary to Defendants’ representations in the RMBS offering documents,
Relator’s information demonstrates that, in most cases, Defendants rarely, if ever,
delivered the original note or an assignment of mortgage in recordable form on a timely
basis. Without the original note or a valid assignment in recordable form, the Barclays
RMBS trusts were and are unable to foreclose in the event of a default.
19. Defendants have not only failed to disclose these problems (including, by failing
to file updates to any offering documents) but also have actively concealed these
problems from purchasers, including the U.S Government.
20. The U.S. Government relied on the offering documents when purchasing or
otherwise acquiring, financing, insuring or guaranteeing the RMBS and CDOs. The U.S.
Government financed, insured or guaranteed, directly or indirectly, the purchase of
Defendants’ RMBS and CDOs, including purchases by the Failed Credit Unions, the
Failed Banks, the Failed Pension Plans, the FRBNY, PPIFs, the Maiden Lane Entities,
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the Federal Home Loan Banks, American International Group, Inc. and Fannie Mae and
Freddie Mac (each defined in paragraph 37 below). Each of those Government
Purchasers purchased, insured or otherwise acquired billions of dollars of the RMBS and
CDOs with funding provided by the U.S. Government, and through direct purchases and
guarantees funded by the Federal Reserve System, the central banking system of the
United States (the “Federal Reserve”) and the U.S. Treasury (the “Treasury”). The U.S.
Government has suffered losses as a consequence.
A. RELATOR’S INFORMATION
21. Relator’s knowledge of the mortgage security business (acquired when he was in
investment banking) played a critical role in formulating his information against the
investment banks. From 2002 on, Relator was aware of diminished mortgage origination
standards, inflating property values, flawed RMBS execution and packaging of unsellable
securities into CDOs and/or Credit Default Swaps. Relator independently gathered and
reviewed thousands of notes and mortgages backing Defendants’ RMBS deals and
thousands of documents relating to the underlying borrowers and the properties securing
the mortgage notes backing the RMBS deals. All this information corroborated Relator’s
previous knowledge and experience.
22. Relator reviewed dozens of loan tapes, as filed with the SEC, in order to evaluate
the veracity of Defendants’ offering documents. Using the information on the loan tapes,
Relator accessed records of borrowers and properties and uncovered myriad and
uncountable false statements included in Defendants’ offering documents.
23. Relator’s information revealed that Defendants represented to investors that the
loans underlying the MBS complied with underwriting guidelines and standards.
Defendants publicly stated that: (a) the borrowers were well vetted and creditworthy, (b)
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Defendants conducted due diligence on the loan portfolios included in its MBS trusts, (c)
Defendants conducted an underwriting guideline review of the third party sellers, (d)
loans purchased from third party sellers met underwriting standards, and (e) collateral
properties were all appraised to independent standards. Relator’s information
demonstrates that many of those repeated statements were false.
24. Relator’s discovery of the loans reveals that Defendants fraudulently
misrepresented fundamental information necessary for a potential investor to conduct a
proper valuation of a mortgage backed security. The process of discovering the loans is
an art form unto itself. For example, Defendants’ loan lists (“loan tapes”) of the loans in
their RMBS had no identifying information (i.e. no name of the borrower or address of
the collateral property). To identify the borrower and the collateral property, Relator
devised a reverse triangulation method. One example of the reverse triangulation is
demonstrated by Relator’s unique and original methodology for Orange County, Florida
(Orlando). Florida imposes an ad valorem document tax on mortgages, so Relator
approached the Orange County recorder to see if it was possible to find a document using
the amount of the document tax. This was arranged under the recorders system, and
Relator could search for mortgages by amount using the amount of the document tax.
Relator would use other data points from his loan lists to refine the search process (e.g.
state, county, date of loan, maturity date, interest rate, zip code, etc.) By this process,
Relator was able to refine his search results so the results could be manually reviewed.
The process became self-validating, as once the name of the borrower was identified,
records were searched for indications that the loan was part of the relevant RMBS pool.
This is an example of one methodology in one county. There are over 3,000 county
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recorders in the United States, so the potential number of solutions to finding every loan
is high (but not insurmountable).
25. Defendants failed to disclose the names of the borrowers and the addresses of the
properties securing the mortgage from the loan tapes and elsewhere. Defendants’
concealment and omission ensured that investors would not be able to conduct their own
due diligence on the mortgage loans and make their own judgments about borrowers’
ability to repay their loans and the value of properties securing such loans. This
obfuscation also made it impossible for investors to determine if the information
Defendants provided in the offering documents was accurate. The correct and complete
information was available to the Defendants, but Defendants intentionally concealed this
information from potential MBS purchasers.
26. Relator’s information reveals that Defendants, as a matter of practice, never
provided MBS investors with borrower names or property addresses. In fact, Defendants
built safeguards into their MBS marketing system to prevent such information from being
given to an inquiring investor. Defendants’ MBS salesmen were not given access to the
borrower names or property addresses, so even if an MBS investor asked to look at them,
the salesman could not provide the information. Omitting borrower names and property
addresses from the loan tapes prevented MBS investors from discovering the borrowers’
inability to repay their loans, the overvaluation of properties securing such loans and the
failure to timely transfer loans to the RMBS trusts.
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27. Relator’s information reveals that Defendants used a nominee (MERS) 5 in order
to further the practice of concealing the names of borrowers and the addresses of
collateral properties since the vast majority of mortgage loans that purportedly served as
collateral for the MBS used a nominee. If the mortgages were recorded in the name of
the respective originator and the assignments of the mortgages were delivered and
recorded as provided in the registration statements, an investor could search the public
records and find the loans contained in the applicable Barclays trusts. By recording the
mortgages in the name of a nominee, Barclays concealed from investors the loans owned
by a specific Barclays MBS trust. This allowed Barclays to continue its scheme to hide
from investors the mortgages included in the Barclays MBS trusts. Defendants’ use of
the nominee allowed them to keep specific information (for example, lenders’ names and
the Barclays MBS trust that owned the notes) from showing up in the county clerk
indices.
28. Defendants’ omission of property addresses also concealed from investors that the
collateral properties were routinely and grossly overvalued. Relator’s information
reveals that dozens of properties were used as collateral for $200,000, $300,000 or
$400,000+ loans which properties were, in fact, worth a fraction of the loan amount. The
historic and intrinsic property values compiled by Relator evidence how drastically
values were inflated. After default, the properties detailed in Exhibits A, B & C returned
to their intrinsic values. The post-default values are always within range of the pre-
5
As described below, Barclays used MERS as a nominee in violation of the disclosure in the Registration
Statements. The base prospectus for the Barclays MBS represented that mortgage loans registered in the MERS
system would not be included in an MBS unless disclosed in the prospectus supplement. Neither the prospectus
supplement for SABR 2007-BR5 nor BCAP 2007-AA2 (nor the prospectus supplements for many of the other
MBS) disclosed that any MERS loans would be included in the trust.
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inflation values (evidencing that Defendants made loans at hyper-inflated
values). Defendants’ purported “appraised” values departed radically from historic
intrinsic values - often by a factor of 3 or more. The inflated values were not the result of
a “run up” of the property market, but of the efforts of Defendants (and other investment
banks) to increase the dollar amount and volume of loans so they could issue more and
more RMBS securities. (See ¶ 136 and following of this Complaint).
29. The combination of omitted information and recording loans via a nominee
prevented investors from conducting their own contemporaneous due diligence. Unable
to identify the loans in (or properties securing) a Barclays MBS, investors could not
formulate their own judgments about the ability of borrowers to repay their loans or about
the value of the properties securing such loans.
30. Relator’s information further shows that the Defendants never made timely
transfers of mortgages to its MBS trusts. Had Defendants made timely transfers (known
as “assignments”) of the mortgages to its MBS trusts on or prior to the closing date, as
many of the prospectuses explicitly indicated, investors could have determined the
composition of loans and collateral in the trust simply by searching public records under
the name of the MBS trust. As it was, investors were left in the dark by Defendants’
actions.
31. Possession of an original note (or a timely assignment of the mortgage) is critical
when foreclosure against a property becomes necessary. In the registration statements for
each MBS, Defendants represented for each mortgage loan that the original note,
mortgage, and an assignment would be delivered to the respective MBS trust on the
closing date. Relator’s information shows Defendants never delivered the original note
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(or assignment of mortgage in recordable form) on a timely basis and, in almost all cases,
the original note (or an assignment of the mortgage) was never delivered. Defendants
were solely responsible for all failures to deliver the original notes and/or a valid
assignment of mortgage to the MBS trusts. Without the original note or a valid
assignment in recordable form, the Barclays MBS trusts are unable to foreclose in the
event of a default, or must incur additional costs to do so. This factor significantly
decreased the value of the collateral, causing damage to investors.
32. Despite Defendants’ knowledge of the significant and serious problems about the
MBS trusts missing the original notes and mortgages assignments, Defendants failed to
disclose these problems (including, by failing to file updates to the registration
statements) and have actively concealed these problems from purchasers, including the
U.S. Government.
33. Defendants’ failure to properly transfer the mortgage loans to Defendants’ MBS
trusts also jeopardized (and continues to jeopardize) their tax-exempt status. Under
Federal tax law, mortgage loans must be transferred to an MBS trust within 90 days of
the trust’s closing. Exhibits D, E & F list hundreds of assignments to various trusts,
almost all occurring much later than 90 days after closing. All the late loan transfers to
Defendants’ MBS trusts carry a potential tax penalty of 100% of the amount of the loan.
If the IRS chose to enforce the tax, virtually all of Defendants’ MBS would become
worthless overnight.
34. Relator’s information reveals that Defendants consistently and repeatedly sold
CDOs and MBS to the Government Purchasers (defined below) by knowingly and/or
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recklessly making false statements and omitting material information regarding the very
loans and corresponding collateral that backed the RMBS securities sold.
II. PARTIES
A. THE PLAINTIFF
35. This action is brought on behalf of the United States of America, its agencies,
departments, and entities, including, without limitation, the United States Treasury, the
Federal Reserve, and the Government Entities, as set forth and defined below.
B. THE RELATOR
36. Relator Joseph Amico is a citizen of the United States and resides in the State of
New York.
C. THE DEFENDANTS
37. Defendants include Barclays Bank PLC (“Barclays Bank”), incorporated in 1925
as a public limited company registered in England and Wales and regulated by the United
Kingdom's Financial Services Authority. Barclays is the direct corporate parent of BCAP
and wholly-owns Barclays Capital and HomEq Servicing. Barclays also administrates all
of Sutton’s operations. The registered head office of Barclays is located at 1 Churchill
Place, London, E14 5HP. Barclays maintains a branch office at 200 Park Avenue, New
York, New York 10166. Barclays Bank purchased substantially all of the mortgage loans
that were included in the MBS and was the sponsor for most of the MBS. Barclays
provided warehouse and repurchase financing to most of the third party mortgage
originators that originated the loans sold to Barclays Bank (and Sutton) that were
included in the MBS.
38. Sutton Funding LLC (“Sutton”) is a Delaware limited liability company with its
registered head office located at 2711 Centreville Road, Suite 400, Wilmington,
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Delaware 19808. Sutton was the sponsor for certain of the MBS and purchased all of the
mortgage loans that were included in such MBS. Barclays, as administrator, manages all
of Sutton’s operations in connection with the purchase and disposition of mortgage loan
assets and arranges financing from lenders to fund Sutton's acquisition of mortgage loan
assets. As a result of Barclays' administration of Sutton, Sutton is an affiliate of
Barclays. Barclays, in its role as administrator for Sutton, maintains a branch office at
200 Park Avenue, New York, New York 10166.
39. Barclays Capital Inc. (“Barclays Capital”) is registered as a broker-dealer under
the Securities Exchange Act of 1934. Barclays Capital has its principal place of business
at 745 Seventh Avenue, New York, NY 10016. Barclays Capital is an indirect wholly-
owned subsidiary of Barclays Bank. Barclays Capital was the underwriter for each MBS
and was the initial purchaser, placement agent and the party who structured and arranged
the CDOs and was intimately involved in the offerings of such securities.
40. BCAP LLC (“BCAP”) is a Delaware limited liability company with its principal
place of business at 200 Park Avenue, New York, New York 10166. BCAP is a direct,
wholly-owned subsidiary of Barclays Bank. BCAP was the depositor for all of the MBS.
41. Barclays Capital Real Estate Inc. d/b/a HomEq Servicing ("HomEq Servicing") is
a Delaware corporation with its principal place of business at 745 Seventh Avenue, New
York, NY 10016. HomEq Servicing is a nationwide consumer loan servicing company,
primarily involved in mortgage loan servicing, with facilities in North Highlands,
California, Raleigh, North Carolina and Boone, North Carolina. HomEq Servicing is an
indirect, wholly-owned subsidiary of Barclays Bank. HomEq Servicing was the servicer
for a significant amount of the mortgage loans included in the MBS.
16
42. As defined above, collectively, these entities are referred to as “Barclays” or
“Defendants.”
D. THE NON-PARTY ORIGINATORS
43. The loans underlying the MBS were acquired by either Barclays Bank or Sutton
for each MBS from non-party mortgage originators. The originators of most of the loans
underlying the MBS include: Aegis Mortgage Corporation, Chevy Chase Bank, F.S.B.,
Countrywide Home Loans, Inc., Inc., Fremont Investment & Loan, IndyMac Bank,
F.S.B., New Century Financial Corporation and its subsidiaries, Option One Mortgage
Corporation, Wells Fargo Bank, N.A, and WMC Mortgage Corp.
E. THE GOVERNMENT PURCHASERS
44. The U.S. Government, through purchases, financings, insurance, and guarantees
funded by the Federal Reserve and by the U.S. Treasury, directly and indirectly, acquired
Defendants’ MBS and CDOs. The U.S. Government includes the following
“Government Purchasers”:
• “NCUA” means, collectively, the National Credit Union Administration Board (the
“NCUA Board”), as Liquidating Agent of U.S. Central Federal Credit Union (“U.S
Central”), Western Corporate Federal Credit Union (“Western”), Southwest
Corporate Federal Credit Union (“Southwest”), Members United Corporate Federal
Credit Union (“Members”) and Constitution Corporate Federal Credit Union
(“Constitution”), and all other credit unions for which the NCUA Board served as
liquidating agent between March 4, 2005 and the date hereof (collectively, the “Failed
Credit Unions”);
• The Failed Credit Unions;
• “FDIC” means, collectively, the Federal Deposit Insurance Corporation, as receiver
for the banks for which the FDIC served as receiver between February 14, 2004 and
the date hereof (collectively, the “Failed Banks”);
• The Failed Banks;
• “PBGC” means, collectively, the Pension Benefit Guaranty Corporation, as trustee
for the PBGC trusteed-plans terminated between January 1, 2004 and the date hereof
(collectively, the “Failed Pension Plans”);
• The Failed Pension Plans;
• “Fannie Mae” means The Federal National Mortgage Association;
17
• “Freddie Mac” means The Federal Home Loan Mortgage Corporation;
• “FHFA” means the Federal Housing Finance Agency, as conservator of Fannie Mae
and Freddie Mac;
• “FRBNY” means the Federal Reserve Bank of New York;
• “Federal Home Loan Banks” means the 12 regional federal home loan banks a part of
the Federal Home Loan Bank System;
• “PPIFs” means the public-private investment funds that are provided equity and debt
financing by the Treasury as part of the Public-Private Investment Partnership
(“PPIP”) of 2009;
• “Maiden Lane Entities” means Maiden Lane LLC (“ML LLC”), Maiden Lane II LLC
(“ML II LLC”) and Maiden Lane III LLC (“ML III LLC”); and
• “AIG” means American International Group, Inc., and its subsidiaries (including AIG
Financial Products) and affiliates.
• The Failed Credit Unions are listed on Annex C and the Failed Banks are listed on
Annex D.
III. JURISDICTION AND VENUE
45. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
§1331, and the FCA, particularly 31 U.S.C. §3732(a), which specifically confers
jurisdiction over actions brought pursuant to 31 U.S.C. §3729 and §3730. This Court has
personal jurisdiction, as some of the acts proscribed by §3729 as alleged herein occurred
in the Eastern District of New York. Furthermore, certain of the Defendants may be
found in the District and transact business in this District as set forth herein.
46. Venue is proper in this District pursuant to 28 U.S.C. §1391 and 31 U.S.C.
§3732(a) because several of the Defendants are located in this District, and some of the
acts and transactions alleged herein and proscribed by 31 U.S.C. §3729 occurred in this
District. Defendants are also subject to personal jurisdiction in this District.
IV. CONDITIONS PRECEDENT
47. Pursuant to 31 U.S.C. § 3729 et seq., this Complaint is to be filed in camera and
under seal, and is to remain under seal for a period of at least sixty days and shall not be
served on Defendants until the Court so orders. Further, the United States Government
18
may elect to intervene and proceed with the action within the sixty day time frame after it
receives both the Complaint and the material evidence submitted to it.
48. This suit is based on Relator’s knowledge and information he has independently
developed. Relator has direct and independent personal knowledge and is the original
source of the information on which the allegations herein are based. The U.S.
Government has not made this or a similar case against the Defendants, nor to Relator’s
knowledge was there an open Government investigation targeting Defendants in relation
to these claims before Relator presented his information to the DOJ. As mentioned above,
when Relator was asked to be a “whistleblower”, the US Attorney’s office researched and
confirmed there were no open investigations at the time (2013). In particular, Relator has
mapped the names of borrowers and addresses of properties to the loan numbers set forth
in the loan tapes and independently gathered and reviewed thousands of notes and
mortgages backing MBS deals, some of which are described herein, and thousands of
documents relating to the underlying borrowers and the property securing the mortgage
notes backing the MBS deals. Relator’s information demonstrates that Defendants have
made and used false records and statements, and presented a false claim for payment,
against the U.S. Government.
49. Relator has voluntarily provided all of the material information alleged herein to
the Federal Government before filing this action based on said information.
50. Relator has previously served a copy of the same upon the United States and,
contemporaneously with the filing of this Complaint, has also served the United States
with written information setting forth and enclosing all material evidence and information
he possesses, pursuant to the requirements of 31 U.S.C. § 3730(b)(2).
19
51. Relator has complied with all other conditions precedent to bringing this action.
V. FACTS COMMON TO ALL COUNTS
52. Relator incorporates by reference all preceding paragraphs of the Complaint as if
fully set forth herein.
53. Relator collected thousands of notes and mortgages and thousands of documents
relating to the borrowers and properties securing the mortgage notes backing the MBS
deals. The documents include notes, mortgages or deeds of trust, assignments,
satisfactions, lis pendens, notices of trustee’s sale, foreclosure judgments, foreclosure
deeds, trustee deeds, quitclaim and warranty deeds, foreclosure pleadings, civil, criminal
and bankruptcy judgments, and other documents.
54. Relator conducted a loan-level review of Securitized Asset Backed Receivables
LLC Trust 2007-BR5 (“SABR 2007-BR5”), which closed on or about July 10, 2007 and
BCAP LLC Trust 2007-AA2 (“BCAP 2007-AA2”), which closed on or about March 29,
2007. Exhibit A includes a sample of information concerning the borrowers and
properties securing the loans comprising the SABR 2007-BR5 trust. Exhibit B includes a
sample of information concerning the borrowers and properties that secured the loans
comprising the BCAP 2007-AA2 trust. Exhibit C includes a sample of information
concerning the borrowers and properties that secured the loans comprising certain other
Barclays MBS trust.
A. MBS BACKGROUND
55. Defendants purchased loans from third parties. It then bundled these loans into
the MBS it sold to investors. According to the registration statements for the MBS,
Barclays Bank conducted due diligence on all the related third party mortgage loan
20
originators, including a review of such parties’ underwriting guidelines, and a due
diligence review of loans acquired.
56. Defendants purchased the loans securitized into the Barclays RMBS, had access
to the loan files, and represented that they conducted due diligence on such loans.
Defendants had direct, first-hand knowledge and access to material information regarding
each borrower and each property underlying each mortgage.
57. Defendants sold their MBS pursuant to registration statements, which purportedly
described the MBS’s terms (the “Registration Statements”6). Defendants sold their MBS
and their CDOs pursuant to offering circulars, pitchbooks and other oral and written
materials prepared and delivered to purchasers (together with the Registration
Statements, the “Offering Documents”).
58. Defendants are directly responsible for the omissions and misstatements of
material fact contained in the Offering Documents because they prepared, signed, filed
and/or used these documents to market and sell the MBS, and/or directed and controlled
such activities and chose the trustee for each MBS trust.
59. MBS securities pay principal and interest much like a regular bond. Payments of
interest and principal for MBS securities flow from payments on mortgage loans owned
by the MBS trust. In short, borrowers’ mortgage loan payments are used to pay principal
and interest on MBS securities. The ability of the borrowers to repay their mortgage
loans is crucial to a steady cash flow necessary to make payments to MBS investors.
6
The MBS were sold pursuant to registration statements, which included prospectuses and prospectus supplements.
For a specified Barclays MBS, the associated registration statement (including the prospectus, the related
prospective supplement and other documents, including the assignment agreements, master servicing and trust
agreement, loan purchase agreements, underwriting agreement and loan tapes filed with the Securities and Exchange
Commission) is referred to herein as the “Registration Statement.” For all Barclays MBS, collectively, the
associated registration statements are referred to herein as the “Registration Statements.”
21
60. Two primary asset classes back RMBS trusts: the loans and the collateral
properties. The loans are dependent on the ability of the Borrowers to repay them. The
collateral properties secure performance of the loans; if the Borrower does not repay his
loan, he loses his property.
61. In event of a default by a borrower, the value of the property collateralizing a
borrower’s mortgage loan is crucial to an MBS trust recovering its investment in a loan.
In short, a borrower’s property guarantees or secures his loan. If a borrower defaults, the
MBS trust forecloses the mortgage (or deed of trust), sells the property and gets its
money back (assuming the property is worth more than the loan).
B. THE BARCLAYS RMBS PROCESS
62. Each of the Defendants had a role in the securitization process and the marketing
for most or all of the MBS. According to the information provided in the Registration
Statements, this process included (i) purchasing mortgage loans from third party
originators, through Barclays Bank or Sutton (ii) structuring and arranging the
securitizations, (iii) Barclays Bank or Sutton selling the mortgage loans to BCAP, as
depositor, (iv) transferring the mortgage loans to the related MBS trust, (v) issuing the
MBS certificates, (vi) underwriting the public offering of the MBS, and (vii) marketing
and selling the MBS through Barclays Capital to purchasers such as the Failed Credit
Unions, the Failed Banks, the Failed Pension Plans, the Federal Home Loan Banks, and
Fannie Mae and Freddie Mac.
63. Defendant Barclays Bank acted as sponsor and seller for most of the MBS, and
Sutton acted as sponsor and seller for the rest. As sponsors, Barclays Bank and Sutton
acquired mortgage loans from third party originators. Barclays, as administrator for
Sutton, managed all of Sutton’s operations in connection with the purchase and
22
disposition of the mortgage loans and arranged the financing to fund Sutton's acquisition
of the mortgage loans. Barclays Bank or Sutton, as the case may be, purchased the
mortgage loans from the originators pursuant to a Mortgage Loan Purchase Agreement, a
Master Mortgage Loan Purchase and Interim Servicing Agreement, or similar
agreements. Barclays Bank or Sutton initiated the securitization of the loans it acquired
by transferring the mortgage loans to BCAP, as depositor, pursuant to an Assignment &
Assumption Agreement, Assignment and Recognition Agreement, Bill of Sale or similar
agreements. BCAP then transferred such loans to the MBS trust pursuant to a Pooling
and Servicing Agreement (with respect to the SABR MBS transactions) or a Trust
Agreement (with respect to the BCAP MBS transactions) or similar agreements. With
respect to each Barclays MBS transaction, Barclays Bank made certain representations
and warranties with respect to the mortgage loans included in the MBS trust pursuant to a
Representations and Warranties Agreement or a Representation Letter.
64. According to the registration statement for SABR 2007-BR5, from 2004 through
and including May 2007, Defendants sponsored MBS with an aggregate principal balance
of approximately $37.26 billion. Barclays Bank sponsored MBS with an aggregate
principal balance of approximately $8.19 billion in 2004, $10.07 billion in 2005 and
$2.97 billion in 2006. Sutton sponsored MBS with an aggregate principal balance of
approximately $9.32 billion in 2006 and $6.71 billion in 2007.
65. In their capacity as sponsor, Barclays Bank or Sutton (or both where they co-
sponsored a transaction), purchased the mortgage loans to be securitized and provided
data to the credit rating agencies to secure investment grade ratings for the MBS.
Barclays Bank or Sutton then transferred the loans to BCAP as the depositor, which
23
transferred the mortgage loans to a MBS trust. Barclays Bank or Sutton selected
Barclays Capital as the underwriter for the MBS securities. Barclays Bank or Sutton also
selected the servicers of the mortgage loans it purchased and securitized. In many
instances, defendant HomEq Servicing was selected as servicer of the mortgage loans
included in the MBS trust. In their role as sponsor, Barclays Bank or Sutton knew and
intended the mortgage loans it purchased would be sold in connection with the
securitization process. 7 Barclays, as administrator for Sutton, managed all of Sutton’s
operations in connection with each part of the securitization process described herein.
66. Barclays Capital was the lead underwriter for all of the MBS and all of the CDOs.
In that role, it was responsible for underwriting and managing the offer and sale of the
MBS and the CDOs. Barclays Capital was also obligated to conduct meaningful due
diligence to ensure (i) the Registration Statements about the MBS and (ii) the Offering
Documents about the CDOs did not contain any material omissions or misstatements,
including as to the manner in which the mortgage loans underlying the MBS, and the
RMBS underlying the CDOs were originated, transferred and underwritten.
67. Barclays Bank wholly owns its subsidiaries Barclays Capital, BCAP and HomEq
Servicing and controls all of the operations of its affiliate Sutton. Unlike typical arms-
length securitizations, the MBS described herein involved various Barclays Bank
subsidiaries and affiliates at virtually each step in the chain. For all of the MBS, the
7
As described in the prospectuses’ for all the MBS:
“As a sponsor or co-sponsor, both Barclays and Sutton acquire mortgage loans and initiate their securitization by
transferring the mortgage loans to the depositor or another entity that acts in a similar capacity as the depositor,
which mortgage loans will ultimately be transferred to the issuing entity for the related securitization. In
coordination with Barclays Capital Inc., both Barclays and Sutton work with rating agencies, co-sponsors, loan
sellers and servicers in structuring the securitization transaction.”
24
sponsor was either Barclays Bank or Sutton, the depositor was BCAP and the lead
underwriter was Barclays Capital.
68. As the immediate corporate parent of Barclays Capital, BCAP and HomEq
Servicing, Barclays Bank had the power to direct and control the actions of these entities
relating to the MBS, and in fact exercised such direction and control over the activities of
such entities relating to the purchase of the mortgage loans, the issuance and sale of the
MBS and the servicing of the mortgage loans underlying the MBS. Barclays, as the
administrator for all of Sutton’s operations, managed all of Sutton’s operations in
connection with each part of the securitization process described herein.
69. Defendants BCAP (the depositor for all of the MBS), Barclays Bank and Sutton
(the sponsor for all of the MBS) and Barclays Capital (the underwriter for all of the
MBS) are directly responsible for the omissions and misstatements of material fact
contained in the Registration Statements for the MBS because they prepared, signed,
filed, supplied information for, and/or used these documents to market and sell the MBS,
and/or directed and controlled such activities. Defendant Barclays Capital (the initial
purchaser, placement agent and party structuring and arranging the CDOs) is directly
responsible for the omissions and misstatements of material fact contained in the Offering
Documents for the CDOs because it prepared and/or used these documents to market and
sell the CDOs, and/or directed and controlled such activities.
70. Defendant Barclays Bank is also responsible for the misstatements and omissions
of material fact contained in the Registration Statements and the Offering Documents for
the CDOs by virtue of its direction and control over Defendants Sutton, BCAP, Barclays
Capital and HomEq Servicing. Barclays Bank also directly participated in and exercised
25
dominion and control over the business operations of Defendants Sutton, BCAP,
Barclays Capital and HomEq Servicing.
71. Barclays Bank, through its subsidiaries and affiliates was deeply involved in the
RMBS market. Barclays Bank aggressively purchased and securitized large volumes of
mortgage loans and thereby contributed to Defendants’ omissions of material facts and to
the inclusion of untrue statements of material facts in the Registration and the Offering
Documents relating to the RMBS and CDOs.
72. Barclays Bank was also heavily involved in financing the origination of the
defective mortgage loans by the third-party originators that were used as collateral for the
Barclays MBS. Barclays Bank provided warehouse and repurchase financing to the
third-party mortgage originators to enable them to originate mortgage loans for
securitization.
C. THE BARCLAYS CDO PROCESS
73. The CDOs are similar in design to MBS, except the collateral for CDOs are MBS
securities (and/or other CDO securities). As with the MBS, performance of the CDOs is
ultimately based on the performance of the mortgage notes and collateral underlying the
MBS (or the other CDOs) which a CDO owns. The CDOs consisted of “mezzanine”
CDOs which were backed by the BBB-rated tranches of MBS and “high grade” CDOs
which were backed by single-A and double-AA rated securities.8 A third type of CDO is
a “CDO-Squared” which is a CDO collateralized primarily with securities of other
CDOs.
8
Between 2003 and 2006, the lower rated RMBS junior tranches became popular collateral for CDOs because of the
higher rates they offered. The higher rates on these BBB rated tranches of the RMBS allowed CDOs collateralized
by such assets to themselves offer higher interest rates on the various CDO tranches.
26
74. Barclays Capital had an inventory of unsold CDOs which it sold by creating new
CDOs which purchased unsold tranches of its older CDOs. These CDOs are sometimes
called “CDO-squared.” This scheme sent a false signal to buyers of CDOs that the
market for CDOs remained healthy when in fact Barclays Capital’s unsellable securities
were merely being repackaged and re-rated. Barclays Capital knew the CDOs it was
marketing were defective and that their value was impaired from the start. Barclays
Capital did not disclose in the Offering Documents the amount of unsold CDO inventory
Barclays owned or the effect Barclays’ purchases had on the pricing of the CDO
securities sold to purchasers.
75. Barclays Capital did not disclose to CDO purchasers the low quality of the
mortgage assets backing the MBS (and other RMBS) underlying the CDOs. By mid-
2004 at the latest, Defendants had institutional knowledge of the poor quality of the
mortgage loans that Defendants were using to create the MBS.
D. RELATOR’S LOAN-LEVEL NATIONWIDE REVIEW OF THE

BORROWERS AND COLLATERAL PROPERTIES
UNDERLYING THE BARCLAYS RMBS TRUSTS REVEALS FRAUD
76. Relator compiled Exhibits A & B - wide ranging, nationwide reviews of
borrowers and collateral properties underlying the Barclays RMBS trusts SABR 2007-
BR5 and BCAP 2007-AA2, respectively. The borrowers and properties summarized in
Exhibits A and B reveal that Defendants concealed that (i) the borrowers of the loans
underlying the SABR 2007-BR5 and BCAP 2007-AA2 trusts were unlikely to repay their
loans and (ii) the properties collateralizing the debts were overvalued and inadequate. In
Exhibits A and B, Relator reviewed and compiled borrower and collateral property
information from more than 30 counties in multiple states, including New York, Florida
and Arizona. Relator’s findings are further confirmed by the evidence compiled in
27
Exhibit C. The data and its compilation, synthesis and presentation is unique and original
as to the Defendants.
77. Each borrower in Exhibit A is tied to a specific loan number (sometimes more
than one) on the loan tape for SABR 2007-BR5. Each borrower in Exhibit B is tied to a
specific loan number (sometimes more than one) on the loan tape for BCAP 2007-AA2.
78. By way of example: as the Sponsors, Barclays Bank and Sutton selected BCAP
2007-AA2’s pool of approximately 4,514 first lien, fixed-rate and adjustable-rate
mortgage loans having an aggregate principal balance as of March 1, 2007 of
approximately $1,474,020,700. Barclays Bank purchased some of such loans from
Countrywide Home Loans Inc. pursuant to a certain Master Mortgage Loan Purchase
Agreement dated as of August 30, 2006 (the “Countrywide Sale Agreement”) between
Countrywide Home Loans Inc. as seller, and Barclays Bank, as purchaser. Sutton
purchased some of such loans from Wells Fargo Bank, NA pursuant to a certain Seller’s
Warranties and Servicing Agreement (the “WF Sale Agreement”) dated as of February 1,
2007 between Wells Fargo Bank, NA and Sutton, as purchaser. According to the
prospectus for BCAP 2007-AA2, Barclays, on behalf of itself and on behalf of Sutton as
administrator, conducted due diligence on the loan originators and on the loans prior to
acquisition
79. Pursuant to an Assignment and Recognition Agreement, dated as of March 29,
2007, among Barclays Bank, as Assignor, BCAP LLC, as Assignee, and Wells Fargo
Bank NA, Barclays Bank sold the mortgage loans it acquired from Wells Fargo to BCAP.
Pursuant to an Assignment and Recognition Agreement, dated as of March 29, 2007,
among Barclays Bank and Sutton, as Assignors, BCAP LLC, as Assignee, and
28
Countrywide Home Loans, Barclays Bank and Sutton sold the mortgage loans acquired
from Countrywide to BCAP.
80. Pursuant to a Trust Agreement dated as of March 1, 2007, between BCAP LLC,
as depositor, and Wells Fargo Bank, NA as custodian and trustee, the BCAP 2007-AA2
trust was formed. Pursuant to the Trust Agreement, BCAP purportedly conveyed the
loans to the Wells Fargo Bank, as trustee, for the benefit of certificate-holders of the
BCAP 2007-AA2 trust on the closing date. The BCAP 2007-AA2 trust issued
approximately $942,285,985 of certificates and delivered them to BCAP on the Closing
Date.9 Barclays Capital underwrote the certificates and sold them to purchasers (or held
them on its books or the books of its affiliates).
81. Pursuant to a Representation Letter dated March 29, 2007 between Barclays Bank
and BCAP, Barclays Bank guaranteed the truth and accuracy of certain of the
representations and warranties made by Wells Fargo Bank and Countrywide Home Loans
with respect to the Mortgage Loans. The BCAP 2007-AA2 trust was a third-party
beneficiary of the Representation Letter.
82. Each Barclays entity received compensation for their various roles in the
transaction.
83. A photo of each collateral property is included in Exhibits A, B and C. The
photos were obtained from a county assessor’s website or Google Maps. Where
9
The Trust Agreement was filed with the SEC as part of the Registration Statement for BCAP 2007-AA2 as Exhibit
4 to the 8-K filed on April 24, 2007. The WF Sale Agreement and Countrywide Sale Agreement were attached as
Exhibits L-1 and L-2 to the Trust Agreement, the Assignment and Recognition Agreements were attached as
Exhibits N-1 and N-2 to the Trust Agreement and the Representation Letter was attached as Exhibit V to the Trust
Agreement. The loan tape (the “Loan Tape”) which listed the loans (by loan number only) included in the trust was
filed with the SEC on April 2, 2007 under Securities Act Rules 163/433 (and on Form FWP) and became part of the
Registration Statement for BCAP 2007-AA2.
29
historical data on a property was needed, Relator looked up the relevant information on
the county appraiser’s website. Where the county’s website was inadequate (e.g., did not
go back far enough), Relator reviewed the county clerk’s records and/or websites such as
Trulia, Zillow or Movato.
84. Where a borrower had a loan history which could be obtained from public
records, a table of each of those loans is included in Exhibits A, B and C. The table is
derived entirely from mortgage loans taken out by the borrower (or his or her
spouse/domestic partner). For example, see Exhibit C, Borrower #2, Mahendra &
Khemwattie Singh.
85. Certain loans relevant to SABR 2007-BR5 are highlighted in Exhibit A. Where a
borrower had more than one loan from Defendants, each of the loans from Defendants
are highlighted. The table shows the lender/originator in the “Comments” column and
also identifies if the loan was a second mortgage loan. Where the Relator was able to
identify a Barclays RMBS trust to which a second mortgage loan was sold, the trust is
identified in the table.
86. Every borrower in Exhibit A has a table showing the value history of a collateral
property associated with an SABR 2007-BR5 loan. The value history is generally
derived from the county assessor’s office (or, sometimes, from deeds). The value history
table may be short or long depending on a collateral property’s history. The “Comments”
column in the table describes the grantee of a deed, or originator of a loan, where
appropriate. It also states if an amount shown is net (a net number to SABR 2007-BR5
assumes a 5% or 6% real estate commission and closing costs).
30
87. Exhibit A shows the impact to the SABR 2007-BR5 trust of its investment in a
loan to a borrower. If there is no loss on a loan, it is stated. If there has been a loss on a
loan, it is calculated as the amount of any foreclosure judgment less the net recovery from
sale of a property. If there is a short sale (which often occurred in lieu of a foreclosure),
then the amount of loss or gain on a loan is calculated by deducting net sale proceeds
from the loan amount. If a loan is in default or still in foreclosure, then the table states
SABR 2007-BR5 has not yet recovered its investment. Where there is a second
mortgage, the second mortgage investor, when known, is identified, as well as the impact
on it (usually a total loss). The loss number is generally described as a “minimum” as
there are often significant costs associated with a foreclosure which are incurred post-
judgment and in connection with a property sale.
88. Occasionally, where Relator recovered relevant information about a borrower,
that information is condensed into one or two sentences in Exhibit A. In certain cases, a
parenthetical is added to give depth to a borrower’s circumstances. The Exhibits to this
Complaint are the product of thousands of hours of experience and required hundreds of
hours of work by the Relator using his special experience, knowledge and expertise. The
synthesis and presentation of previously unknown or never before obtained information
by relator is unique and original.
E. THE BORROWERS AND COLLATERAL PROPERTIES
89. The purpose of Exhibit A is to give the reader a single format from which to
absorb and process the types of loans and borrowers that comprised SABR 2007-BR5.
Each of the stories highlighted in Exhibit A demonstrates that Defendants fraudulently
misstated and omitted material information in the Offering Documents associated with
SABR 2007-BR5.
31
Exhibit A – SABR 2007-BR5
Owen Berry - Orlando, Florida
90. Consider, for example, Owen Berry, Borrower #55 of Exhibit A. Berry resided at
139 Killarney Drive, Orlando. Berry was a 35 year-old exterminator (mites & other
bugs).
91. During 15 months from March 2006 to June 2007, Berry borrowed over $2.2
million through six mortgage loans to finance four purchases and also to cash out on his
residence. All told, Berry was carrying over $2.4 million in debt by the end of 2007,
when he defaulted.
92. Barclays indicated Berry’s income was about $6,200 per month, which apparently
was inadequate to carry $2.4 million of debt.
93. One of Berry’s four purchases was a condo, Unit 202 at 4385 Wardell Place,
Orlando. Berry purchased the condo during January 2007, new from the developer, for
$352,800. To finance his purchase, Berry took out a 1st mortgage loan via New Century
in the amount of $307,710. Barclays purchased Berry’s loan from New Century and
resold it to SABR 2007-BR5 as loan #2022.
94. Berry defaulted on loan #2022 and was in foreclosure by mid-2008. (Berry
defaulted on all of his other outstanding loans, too.) Berry sold the unit via a “short sale”
for a net of $139,500 during September, 2008. As result, SABR 2007-BR5 lost over
$168,000 (55%) on its loan to Berry. According to Barclays, the condo unit was
appraised at $345,000, or about $205,000 more than the amount recovered.
95. Unfortunately for investors in SABR 2007-BR5, none of the information about
Berry’s activities was available or accessible to them because Barclays concealed his
32
name and the address of the collateral property. Omitting and concealing this information
made it impossible for investors to assess Berry’s creditworthiness or the relative value of
the collateral property.
96. Defendants’ concealment of Berry’s name, property addresses and use of a
nominee to record its mortgages prevented anyone attempting a review from discovering
the risks. Defendants induced investors to purchase SABR 2007-BR5 securities by
omitting borrower’s names and collateral property addresses and dissuaded investors
from attempting due diligence by telling them the loan was made according to high
standards and vetted. Defendants’ scheme actively denied investors potential access to
material information about the loans.
97. Defendants did not tell potential investors Berry was grossly over-indebted.
With so many loans and little equity in the properties, it was highly likely Berry would
default and SABR 2007-BR5 would suffer losses. Defendants also failed to disclose that
the property Berry posted as collateral was over-valued; its intrinsic value is
demonstrated by reversion to a historically consistent value after foreclosure.
Amirali Vastani - Fort Myers, Florida
98. Consider, for example, Amirali Vastani, Borrower #48 of Exhibit A. Vastani
resided at 310 West 82nd Street, New York, New York. Vastani was a 26 year-old
construction worker and a part time real estate agent.
99. During 14 months from November 2005 to January 2007, Vastani took out almost
$1 million through seven mortgage loans to finance two purchases and to cash out on two
other properties. All told, Vastani was carrying over $804,000 in debt by the end of 2007,
when he defaulted on all his loans.
33
100. Barclays indicated Vastani’s income was about $3,600 per month, which
apparently was inadequate to carry over $804,000 of debt.
101. One of Vastani’s four properties was a modest bungalow at 4407 Railroad
Avenue, Fort Myers, FL. Vastani purchased the bungalow during December 2005, for
$77,000 from Magglott. The $77,000 price to Vastani represented 475% inflation over
Magglott’s purchase price of $13,000 ten years earlier (it was a very modest bungalow).
To finance his purchase, Vastani took out a 1st mortgage loan via United Financial in the
amount of $69,300. Eleven months later, Vastani refinanced the bungalow at 4407
Railroad Avenue via New Century. During November 2006, Vastani took out a $148,750
1st mortgage loan via New Century, cashing out about $79,450 in the process. (Note
Vastani cashed out more than he paid for the property less than a year earlier.) Barclays
purchased Vastani’s loan from New Century and resold it to SABR 2007-BR5 as loan
#1009.
102. Vastani defaulted on loan #1009 and was in foreclosure by mid-2008. After years
in foreclosure, the bungalow was sold during 2014 for unpaid property taxes. As a result,
SABR 2007-BR5 lost over $148,500 (100%) on its loan to Vastani. According to
Barclays, the bungalow was appraised at $175,000 in 2006, or more than twice the
inflated price Vastani paid for it eleven months prior.
Vastani’s activities was available or accessible to them because Barclays concealed his
name and the address of the collateral property. Omitting and concealing this information
made it impossible for investors to assess Vastani’s creditworthiness or the relative value
of the collateral property.
34
104. Defendants’ concealment of Vastani’s name, property addresses and use of a
105. Defendants did not tell potential investors Vastani was grossly over-indebted.
With so many loans and little equity in the properties, it was highly likely Vastani would
default and SABR 2007-BR5 would suffer losses. Defendants also failed to disclose that
the property Vastani posted as collateral was over-valued; its intrinsic value is
demonstrated by reversion to a historically consistent value after foreclosure.
Carlos F. Perezmeza - Bonita Springs, Florida
106. Consider, for example, Carlos Perezmeza - borrower #40 of Exhibit A. Perezmeza
resided at 9651 Spanish Moss Way, Bonita Springs. Perezmeza was a 26-year old real
estate agent, mortgage broker and tax return preparer.
107. During 15 months from October 2005 to January 2007, Perezmeza borrowed
almost $1 million through four mortgage loans to finance three purchases and to cash out
on his residence. All told, Perezmeza was carrying over $795,000 in debt by the end of
2007, when he defaulted on all his outstanding loans.
108. Barclays indicated Perezmeza’s income was about $4,200 per month, which
apparently was inadequate to carry over $795,000 of debt.
35
109. One of Perezmeza’s three properties was a condo, Unit 3612 at 9601 Spanish
Moss Way, Bonita Springs FL. Perezmeza purchased the condo during January 2007,
new from the developer, for $242,140. To finance this purchase, Perezmeza took out a 1st
mortgage loan via New Century in the amount of $205,819. Barclays purchased
Perezmeza’s loan from New Century and resold it to SABR 2007-BR5 as loan #1475.
110. Perezmeza defaulted on loan #1475 and was in foreclosure by early 2008. SABR
2007-BR5 foreclosed the mortgage with a judgment of $228,098 against Perezmeza.
SABR 2007-BR5 sold Unit 3612 on the open market during 2009, netting about
$108,250. As a result, SABR 2007-BR5 lost over $119,500 (58%) on its loan to
Perezmeza. According to Barclays, Unit 3612 was appraised at $275,000 in 2007, or
about $165,000 more than the amount recovered.
Perezmeza’s activities was available or accessible to them because Barclays concealed
his name and the address of the collateral property. Omitting and concealing this
information made it impossible for investors to assess Perezmeza’s creditworthiness or
the relative value of the collateral property.
112. Defendants’ concealment of Perezmeza’s name, property addresses and use of a
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113. Defendants did not tell potential investors Perezmeza was grossly over-indebted.
With so many loans and little equity in the properties, it was highly likely Perezmeza
would default and SABR 2007-BR5 would suffer losses. Defendants also failed to
disclose that the property Perezmeza posted as collateral was over-valued; its intrinsic
value is demonstrated by reversion to a historically consistent value after foreclosure.
Exhibit B - BCAP 2007-AA2
Carlos & Norma Vargas - Hialeah, Florida
114. Consider, for example, Carlos & Norma Vargas - borrower #34 of Exhibit B. The
Vargas’ resided at 2623 West 68th Place, Hialeah, FL. Within 90 days, during January-
March, 2007, the Vargas’ decided to spend nearly $1.9 million to buy four units in the
“Porto Bellagio” condominium in Miami, FL. To finance their binge, the Vargas’ took
out eight loans totaling $1,871,150 in less than 90 days, granting 1st or 2nd mortgages on
all four units they acquired.
115. One condo the Vargas’ acquired was Unit 1206 at 17100 North Bay Rd, Miami,
FL. Vargas purchased Unit 1206 for $495,000, a $74,000 increase (18%) over the
purchase price of the prior owner about 18 months earlier. The Vargas’ borrowed
$495,000 (100%) to finance the purchase, taking 1st and 2nd mortgage loans via Liberty
Home Mortgage. Vargas’ 1st mortgage loan of $396,000 was purchased by Barclays,
which re-sold it to BCAP 2007-AA2 as loan #148784521. Barclays represented Unit
1206 was the Vargas’ primary residence (it was not). Barclays also represented the
Vargas’ income was about $7,000 per month (inadequate for nearly $1.9 million of debt).
116. The Vargas’ defaulted on loan #148784521 by early 2008. BCAP 2007-AA2
commenced foreclosure of the mortgage, at which time the Vargas’ arranged a “short
37
sale”. Unit 1206 was sold via a short sale on the open market during 2010, netting about
$218,500. As a result, BCAP 2007-AA2 lost over $177,000 (45%) on its loan to the
Vargas. According to Barclays, Unit 1206 was appraised at $495,000 in 2007, or about
$275,000 more than the amount recovered.
117. Defendants’ concealment of the Vargas’ name, collateral property address and
use of a nominee to record its mortgages prevented anyone attempting a review from
discovering the risks. Defendants induced investors to purchase BCAP 2007-AA2
securities by omitting the borrowers’ names and collateral properties’ addresses and
dissuaded investors from attempting due diligence by telling them the loan pool was
made according to high standards and vetted. Defendants’ scheme actively denied
investors potential access to material information about the loan pool.
118. Defendants omitted informing potential investors that the Vargas’ were grossly
over-indebted, the properties were not their residence and their values inflated. With so
many loans, it was highly likely the Vargas’ would default and BCAP 2007-AA2 would
suffer losses. Defendants also concealed that they had dropped underwriting standards so
low, that even with the Vargas’ over-indebtedness, they were willing represent to
investors these were a sound loans. Defendants also failed to disclose that the property
the Vargas’ posted as collateral was grossly over-valued; its true values demonstrated by
reversion to a historically consistent value after foreclosure.
Mirta & Mariano Petrillo - Riverview, Florida
119. Consider, for example, Mirta & Mariano Petrillo - borrower #52 of Exhibit B.
The Petrillos reside in Buenos Aires, Argentina. The Petrillos sold a condo they owned in
Miami and decided to buy two condos in Riverview, FL (Tampa area). To finance their
38
two condos, the Petrillos simultaneously took out separate loans on the two condos, one
in the name of Mirta and one in the name of Mariano. Barclays represented that both
condos were second homes (only one condo could be a second home, the other had to be
a third home…).
120. One condo the Petrillos acquired was Unit 202 at 5811 Legacy Crescent Place,
Riverview, FL. Mirta Petrillo purchased Unit 202 for $202,600, an initial offering of an
existing rental converted to a condo. Mirta Petrillo borrowed $151,950 (75%) to finance
the purchase, taking a 1st mortgage loan via Countrywide. Petrillo’s 1st mortgage loan of
$151,950 was purchased by Barclays, which re-sold it to BCAP 2007-AA2 as loan
#155525673.
121. Mirta Petrillo defaulted on loan #155525673 by mid-2008. BCAP 2007-AA2
foreclosed the mortgage with a judgment of $205,178 against Mirta and re-possessed the
unit. Unit 202 was sold by BCAP 2007-AA2 on the open market during 2013, netting
about $54,000. As a result, BCAP 2007-AA2 lost over $151,000 (100%) on its loan to
Mirta Petrillo. According to Barclays, Unit 202 was appraised at $204,000 in 2007, or
about 3.8 times the amount recovered in 2013.
122. The second condo the Petrillos acquired was Unit 203 at 5507 Legacy Crescent
Place, Riverview, FL. Mariano Petrillo purchased Unit 203 for $227,400, an initial
offering of an existing rental converted to a condo. Mariano Petrillo borrowed $181,920
(80%) to finance the purchase, taking a 1st mortgage loan via Countrywide. Petrillo’s 1st
mortgage loan of $181,920 was purchased by Barclays, which re-sold it to BCAP 2007-
AA2 as loan #155525665.
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123. Mariano Petrillo defaulted on loan #155525665 by mid-2008. BCAP 2007-AA2
foreclosed the mortgage with a judgment of $245,114 against Mariano. Unit 203 was sold
at auction on the open market during 2013, netting about $43,000. As a result, BCAP
2007-AA2 lost over $181,900 (100%) on its loan to Mariano Petrillo. According to
Barclays, Unit 203 was appraised at $228,000 in 2007, or about 5.3 times the amount
recovered in 2013.
124. Defendants’ concealment of the Petrillos name, collateral property address and
125. Defendants omitted informing potential investors that the Petrillos were over-
indebted, the properties were not their residence and the values inflated. With several
loans, it was highly likely the Petrillos would default and BCAP 2007-AA2 would suffer
losses. Defendants also concealed that they had dropped underwriting standards so low,
that even with the Petrillos’ over-indebtedness, they were willing represent to investors
these were a sound loans. Defendants also failed to disclose that the property the
Petrillos posted as collateral was grossly over-valued; its true values demonstrated by
reversion to a historically consistent value after foreclosure.
Juan Carlos Chediak - Miami, Florida
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126. Consider, for example, Juan Carlos Chediak - borrower #65 of Exhibit B.
Chediak resided (and still resides) at 12675 NW 6th Street, Miami, FL. Chediak is a
network administrator at the University of Miami.
127. Between July 2004 and February 2007, Chediak borrowed a total of $5,121,150,
taking out fourteen mortgage loans in the process. Chediak bought several condos, his
residence and a couple of single family homes. Chediak managed to flip a couple of
condos and a home, but defaulted on nearly $2.6 million of outstanding debt. Eventually,
he declared bankruptcy.
128. One condo Chediak acquired was Unit 322 at 1800 Sans Souci Boulevard,
Miami, FL. Chediak purchased Unit 322 for $168,490, an initial offering of an existing
rental converted to a condo. Chediak borrowed $168,400 (100%) to finance the purchase,
taking 1st and 2nd mortgage loans via Countrywide. Chediak’s 1st mortgage loan of
$134,750 was purchased by Barclays, which re-sold it to BCAP 2007-AA2 as loan
#157812234. Barclays represented Unit 322 was Chediak’s primary residence (it was
not). Barclays also represented that Chediak’s income was in the range of $5,000 per
month (inadequate to service nearly $2.6 million of debt).
129. Chediak defaulted on loan #157812234 by mid-2008. BCAP 2007-AA2
commenced foreclosure of the mortgage, at which time Chediak declared bankruptcy.
BCAP 2007-AA2 eventually obtained a judgment of $184,600 against Chediak in 2014
and repossessed the condo. Unit 322 was sold by BCAP 2007-AA2 on the open market
during 2015, netting about $83,000. As a result, BCAP 2007-AA2 lost over $101,000
(75%) on its loan to Chediak. According to Barclays, Unit 322 was appraised at $168,990
in 2007, or about $85,000 more than the amount recovered in 2015.
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130. Defendants’ concealment of Chediak’s name, collateral property address and use
of a nominee to record its mortgages prevented anyone attempting a review from
131. Defendants omitted informing potential investors that Chediak was grossly over-
indebted, the property was not his residence and their values inflated. With so many
loans, it was highly likely Chediak would default and BCAP 2007-AA2 would suffer
losses. Defendants also concealed that they had dropped underwriting standards so low,
that even with Chediak’s over-indebtedness, they were willing represent to investors it
was a sound loan. Defendants also failed to disclose that the property Chediak posted as
collateral was grossly over-valued; its true values demonstrated by reversion to a
historically consistent value after foreclosure.
Exhibit C - Multi-Trust Survey
132. Exhibit C is a multi-trust survey that shows Barclay’s fraudulent activities were
not limited to the trusts reviewed in the other Exhibits.
Marie Josee Alexandre - Queens, NY (SABR 2007-BR1)
133. Consider, for example, Marie Josee Alexandre - borrower #6 of Exhibit C.
Alexandre resided (and still resides) at 111-11 203rd Street, St Albans, Queens, NY. She
was about 60 years old in 2006.
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134. Alexandre purchased 131 Woodbine Street, Brooklyn, NY for $575,000 during
December 2006. Alexandre’s purchase of 131 Woodbine was the fourth sale of the
property in five years (2001-2006). In the course of those four sales, the price of the
property was inflated from $132,000 to $575,000, a $443,000 increase (335%) without,
based on the picture, any improvement. Alexandre borrowed $575,000 (100%) to finance
the purchase, taking 1st and 2nd mortgage loans via New Century. Alexandre’s 1st
mortgage loan of $460,000 and 2nd mortgage loan of $115,000 were purchased by
Barclays, which re-sold them to SABR 2007-BR1 as loans #4284 & #4685. Barclays
represented 131 Woodbine was Alexandre’s primary residence (it was not). Barclays also
represented Alexandre’s income was about $7,000 per month. Alexandre’s mortgage on
her primary residence was $187,000 as of October 2006. The loans on 131 Woodbine
represented a 300%+ increase in her debt. (There is no indication her income increased
by over 300%.)
135. Alexandre defaulted on loans #4284 & #4685 by 2009. SABR 2007-BR1
commenced foreclosure of the 1st mortgage, at which time Alexandre arranged a “short
sale”. 131 Woodbine was sold via a short sale on the open market during 2011, netting
about $156,400. As a result, SABR 2007-BR1 lost over $303,000 (66%) on its 1st
mortgage loan to Alexandre. SABR 2007-BR1 also lost its entire $115,000 (100%) 2nd
mortgage loan to Alexandre. According to Barclays, 131 Woodbine was appraised at
$575,000 in 2006, or about 3.6 times the amount recovered in 2011.
136. Defendants’ concealment of Alexandre’s name, collateral property address and
discovering the risks. Defendants induced investors to purchase SABR 2007-BR1
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137. Defendants omitted informing potential investors that Alexandre was over-
indebted, the property was not her residence and its value inflated. It was highly likely
Alexandre would default and SABR 2007-BR1 would suffer losses. Defendants also
failed to disclose that the property Alexandre posted as collateral was grossly over-
valued; its true value demonstrated by reversion to a historically consistent value after
foreclosure.
It’s All About “Profit”
138. Relators’ exhibits demonstrate the Defendants’ complete disregard of
underwriting standards in pursuit of apparent profit. It was common for the issuer to
“create” a 10% profit from carving up the cashflows of an RMBS pool.
139. How did the Defendants’ “profit” from carving up the cash flows from the
mortgage loans? Conceptually, the answer may be broken down into three general frames
of reference: (1) timing; (2) credit quality & (3) volume.
140. For example, most of the loans in BCAP 2007-AA2 were 30-year loans. Given
that the average American stays in their own home about seven years, it is foreseeable
most of the loans in the pool will not run 30 years. Under normal circumstances, most
loans in the pool would pay off after 5 to 10 years because of either a sale or refinancing.
Nearly all RMBS securities assume this timing issue as a fact. (This is known in the
industry as the “prepayment speed assumption”.) And, nearly all RMBS securities carry
44
less than 30-year terms since experience has shown (with varying degrees of accuracy) a
lot of loans are paid off early. If, for example, a sponsor were able to predict that 20% of
a $1 billion pool of loans would be paid off in less than 5 years, then a sponsor would
issue $200 million of 5-year securities (with a lower interest rate), rather than a 30 year
security. If the pool’s 30-year loans carried an average 6% interest rate and a 5-year
“AAA” RMBS security, requiring a 3% interest rate to sell, then a sponsor of the RMBS
could “profit” by carving up the loans into a 5-year slice and an “everything else” slice.
On the 5-year slice of $200 million the sponsor’s “profit” might, on average, be the
difference between 3% and 6% (3%) per year times 5 years times the $200 million.
(Under these assumptions the sponsor’s “profit” would be $30 million.) A sponsor would
profit more if its carving were more efficient: for example, by carving the cash flows into
2-year, 3-year, 5-year, 7-year, 10-year, 15-year and “everything else” slices. This carving
of the timing is pretty much standard in the industry.
141. A second way a sponsor profited from creating RMBS securities was by carving
up the credit quality of the loan pool. Some loans in a pool might be of good credit
quality, some not so good. A sponsor might carve up the credit quality of a pool by
issuing one slice which would bear the first 5% of credit losses (defaults, bankruptcies,
etc.) on a pool-wide basis and a second slice (95% of the pool) which would suffer losses
only after the 5% loss slice was depleted. The 5% “first loss” (or subordinated) slice
would be sold at a high interest rate (say 30%) to compensate for the projected losses. If,
over the average life of loans in the pool (say 10 years), the total losses were estimated to
be only 3%, then the “first loss” slice might yield up to 18% after taking into account the
credit losses. And the 95% “everything else” slice would never have a loss. If this were
45
the case, the 95% slice could be considered “AAA” and could be sold at a low interest
rate - say 4% for a 10 year term. If the loans in a pool had an average 7% interest rate, a
sponsor could profit from creating “first loss” and “everything else” slices since it would
make 3% “profit” on the everything else slice (which likely decreases ratably over the 10
years). If a sponsor created a $1 billion pool, its profit on carving up the credit might total
$100 million ($150 million surplus on a $950 million “everything else” slice over 10
years, less $50 million extra interest on a $50 million “first loss” slice).
142. A third way a sponsor profits from creating RMBS securities is volume. The
greater the size of a pool or number of pools, the greater the “profit.” The Defendants
increased their “profit” by increasing the number of loans, the size of the loans and the
number of RMBS securities. Defendants increased the number of loans by incentives to
both borrowers and loan originators. Incentives to borrowers included “teaser rates” and
higher loan amounts. Teaser rates often took the form of a low interest rate for one, two
or even three years. After then, the rate would shoot up. Defendants encouraged
borrowers to take more loans by refinancing before the “teaser” period expired.
Defendants also encouraged borrowers to take out more loans by offering to lend more
against a property (i.e. inflating the appraised value for a refinance). These incentives led
to borrowers refinancing a single property frequently - many times after only a year or so.
143. Defendants also increased the number of loans by offering incentives to its
correspondent loan originators. The incentives could take several forms, including cash
premiums and financing. Defendants offered cash incentives to loan originators by
buying loans from them for greater than their fair value. For example, an originator
would be offered an incentive of 102% if it generated in excess of $10 million of loans
46
per month. In such an example, Defendants would pay an originator $200,000 more than
the $10 million face value of newly made loans. Incentives of this type encouraged
originators to make speculative loans and inflate values to get over the thresholds and get
free money.
144. Defendants also encouraged more loans by offering larger correspondent loan
originators revolving “warehouse” lines with incentives. (Warehouse credit lines were
used by originators to fund loans and then repaid when the loans were sold. The
Defendants effectively controlled an originator by controlling its credit lines.) If an
originator, for example, produced more than $50 or $100 million of loans per month,
such incentives might take the form of less stringent loan reviews, more favorable interest
rates, or more favorable rollover periods (or all these and more). Incentives of this type
encouraged originators, too, to make speculative loans and inflate values to get over the
thresholds and get more money.
145. These and similar incentives offered by Defendants encouraged inflation of
values, simply because it is easier get to a $1 billion pool if the loans average about
$500,000 each (2,000 loans) than if they average about $100,000 each (10,000 loans).
Defendants desire to make more “profit” pushed the limits to their breaking point.
146. Defendants also made and used incentives to encourage origination of
speculative loans. As an RMBS sponsor could “profit” from carving up the credit (see
above) on 7% loans, they made an even greater profit by carving up the credit on 12%
loans. Defendants convinced investors that by carving up the credit of 12%+ loans, there
wasn’t any greater risk for certain securities. As Relator’s information shows, this was
grossly misleading.
47
147. When Defendants reached the saturation point for traditional RMBS investors,
they prolonged their scheme by packaging RMBS into CDOs. In principle, the scheme
was simple - bad mortgages packaged into RMBS; the bad RMBS then packaged into
CDOs; sell the CDOs to investors. Defendants would “mix and match” at the CDO level,
mixing RMBS with corporate bonds or other securities to create the appearance of
“diversification,” which became the CDO salesmen’s buzz word. Defendants would also
use so-called “independent managers” to create the appearance of an investment pool,
when the actual goal was to repackage unsellable securities, including RMBS. When
Defendants reached saturation level for plain CDOs, they resorted to CDOs of CDOs
(CDO2) to continue the scheme on another level. But, the principles of carving up cash
flows by Defendants described in the preceding paragraphs were reapplied by them at the
CDO and CDO2 levels so they could take even more “profit” out of the process.
F. DEFENDANTS FAILED TO TIMELY TRANSFER LOANS

TO THE MBS TRUSTS
148. Exhibit D includes a sample of assignments of multiple Barclays RMBS trusts.
Relator reviewed in excess of 400 loans included in the loan pool for BCAP 2007-AA2 to
determine if Defendants properly transferred the loans in accordance with the terms of
the Pooling and Servicing Agreement and the disclosures set forth in the Registration
Statement. Exhibit E includes a sample of assignments of the loans in BCAP 2007-AA2.
Relator reviewed in excess of 200 loans included in the loan pool for SABR 2007-BR5 to
determine if the loans were timely transferred to that trust. Exhibit F includes a sample
of assignments of the loans in SABR 2007-BR5.
149. Relator’s review shows, of over 400 sampled loans, Defendants failed to timely
assign or deliver a single loan to the BCAP 2007-AA2 trust as of the closing date or
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within 90 days of the closing date.10 Relator’s review of hundreds loans from SABR
2007-BR5 shows an identical result – Defendants did not transfer a single loan on a
timely basis.
150. Without delivery of the original mortgage notes or an effective, timely
assignment of the mortgage notes, the securities issued by BCAP 2007-AA2 trust (or
SABR 2007-BR5) were not mortgage backed securities, but essentially unsecured debt.11
151. The prospectus supplement for BCAP 2007-AA2 falsely stated that the trust
would hold good title to the loans and related documents and represents: 12
The depositor [BCAP] will cause to be delivered to the custodian, on or

before the closing date, the following documents with respect to each
mortgage loan which constitute the mortgage file:
10
In order for the BCAP 2007-AA2 trust to qualify for tax-free status as a “real estate mortgage investment conduit”
or “REMIC” under the U.S. Internal Revenue Code, loans must be transferred to the REMIC trust on the “start up
date,” or at most 90 days after this date. The “start up date” is the “closing date” specified in the prospectus
supplement. The prospectus represents that “assuming compliance with the trust agreement and servicing agreement”
each REMIC elected by the Trust “will qualify as a REMIC” which implies that all assignments of the mortgage
loans would be completed by 90 days after the closing date. The prospectus supplement states that within 90 days of
the Closing Date, the custodian will review the each mortgage file to confirm that each of the loan documents is in
its possession and is property endorsed as provided in the Trust Agreement. These representations were false and
misleading and made by the Defendants with reckless disregard for their truth. As described below, Defendants
knew that as of the closing date of the MBS transactions that they would and did not deliver valid assignments or the
original notes to the related MBS trust on a timely basis as represented in the Registration Statements because it was
Defendants’ practice to not do so.
11
Fed Home Loan Bank of Chicago v. Bank of America Funding Corp., No. 10CH45033, 2012 WL 4364410 (Ill.
Cir. Ct. Cook County Sept. 19, 2012) (“Defendants’ claim that the Offering Documents never said that the notes
would be validly transferred insinuates that Defendants wish this Court to believe that purchasers bought securities
knowing that the underlying assets could not be enforced.”).
12
The prospectus supplement for SABR 2007-BR5 makes similar representations: “On the closing date for the
initial mortgage loans and on any subsequent transfer date for the subsequent mortgage loans, the depositor will
transfer to the trust fund all of its right, title and interest in and to each of the mortgage loans, together with the
related mortgage notes, mortgages and other related documents . . . The pooling and servicing agreement will
require that, upon certain conditions and within the time period specified in the pooling and servicing agreement, the
seller will deliver to the trustee (or a custodian, as the trustee’s agent for that purpose) the mortgage notes evidencing
the mortgage loans endorsed in blank or to the trustee on behalf of the Certificate holders, together with the other
related documents received by the seller from the originator pursuant to the terms of the underlying purchase
agreement.”
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(a) the original mortgage note, endorsed without recourse in blank by the
last endorsee, including all intervening endorsements showing a
complete chain of endorsement from the originator to the last endorsee;
...
(c) the related original mortgage and evidence of its recording or, in
certain limited circumstances, a copy of the mortgage certified by the
originator, escrow company, title company, or closing attorney;
...
(e) originals of all intervening assignments of mortgage with evidence
of recording thereon, provided that such originals have been returned to
the servicer by the public recording office where such intervening
assignment of mortgage has been delivered for recordation;
152. Neither of the prospectus supplements for BCAP 2007-AA2 nor for SABR 2007-
BR5 provide for exception for delivering a valid assignment of mortgage for mortgage
loans that are registered through Mortgage Electronic Registration Systems, Inc.
(MERS). Nor does either prospectus supplement specify that any of the loans are
registered in the MERS System.
153. The base prospectus provides that “the depositor will be required, as to each
mortgage loan . . . to deliver or cause to be delivered to the trustee, or to the custodian,
the mortgage file for each mortgage loan, containing legal documents relating to the
mortgage loan, including:
• the mortgage note endorsed without recourse to the order of

the trustee or evidence that the mortgage is held for the
trustee through the MERS(R) System
• the mortgage with evidence of recording indicated, except
for any mortgage not returned from the public recording
office, in which case the depositor will deliver or cause to
be delivered a copy of the mortgage certified by the related
Unaffiliated Seller that it is a true and complete copy of the
original of that mortgage submitted for recording; and
• an assignment in recordable form of the mortgage to the
trustee.
154. The base prospectus for both BCAP 2007-AA2 and SABR 2007-BR5 also
provide that loans will only be held through the MERS System “if so specified in the
50
related prospectus supplement.” Neither prospectus supplement for BCAP 2007-AA2 nor
SABR 2007-BR5 specifies that any of the mortgage loans are or will be registered
through MERS. Nor does either prospectus supplement specify an exception for delivery
of a valid assignment for loans held through the MERS System. In any case, the
exceptions for delivering a mortgage assignment in the case of MERS Loans does not
excuse the Defendants from delivering the original notes to the trustee of the applicable
Barclays MBS trust on or prior to the closing date.
VI. DEFENDANTS’ USE OF FALSE RECORDS AND/OR STATEMENTS
155. Plaintiff hereby incorporates by reference in this Complaint (i) every Registration
Statement (including any prospectus supplement) for every MBS issued and (ii) every
Offering Document relating to every CDO.
A. DEFENDANTS MISREPRESENTED MATERIAL INFORMATION WITH

RESPECT TO THE MORTGAGE LOANS THAT COMPRISED THE MBS
156. In connection with both the MBS and the CDOs, Defendants affirmatively
misrepresented material information regarding the underlying mortgage loans originated
and/or purchased by Defendants and packaged and sold to the MBS trusts.
157. Defendants made certain false representations and warranties about the mortgage
loans in the Offering Documents. By way of example, the prospectus supplement for
SABR 2007-BR5 represents that Barclays Bank will make certain representations and
warranties in the Representations and Warranties Agreement dated as of July 10, 2007
between Barclays Bank and BCAP regarding the Mortgage Loans. In the
Representations and Warranties Agreement (which was filed as part of the Registration
Statement for SABR 2007-BR5 as Exhibit O to the Pooling and Servicing Agreement),
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Barclays Bank makes certain representations and warranties with respect to the Mortgage
Loans including:
(a) Mortgage Loans as Described. The information set forth in

the Mortgage Loan Schedule relating to the Mortgage Loans is
complete, true and correct as of the Cut-off Date;
(e) Compliance with Applicable Laws. Any and all requirements of
any federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity, disclosure and all predatory,
abusive and fair lending laws applicable to the Mortgage Loan,
including, without limitation, any provisions relating to
Prepayment Charges, have been complied with . . .;
(s) Ownership. Sutton is the sole owner of record and holder of
the Mortgage Loan and the indebtedness evidenced by each
Mortgage Note. . . .
(u) Appraisal. The Mortgage File contains an appraisal of the
related Mortgaged Property signed prior to the approval of the
Mortgage Loan application by a qualified appraiser, duly
appointed by the applicable Seller, who had no interest, direct or
indirect in the Mortgaged Property or in any loan made on the
security thereof, and whose compensation is not affected by the
approval or disapproval of the Mortgage Loan, and the appraisal
and appraiser both satisfy the requirements of Fannie Mae or
Freddie Mac and Title XI of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 and the regulations
promulgated thereunder, all as in effect on the date the Mortgage
Loan was originated;
(v) LTV. No Mortgage Loan has an LTV greater than 100%;
(c) Underwriting Methodology. The methodology used in
underwriting the extension of credit for each Group I
Mortgage Loan does not rely on the extent of the related
Mortgagor's equity in the collateral as the principal
determining factor in approving such extension of credit. The
methodology employed related objective criteria that related
such facts as, without limitation, the related Mortgagor's
income, assets, and liabilities to the proposed mortgage
payment and, based on such methodology, the Group I
Mortgage Loan's originator made a reasonable determination
that at the time of origination the related Mortgagor had the
ability to make timely payments on the Group I Mortgage
Loan;
52
158. The Registration Statement for BCAP 2007-AA2 contains similar affirmative
misrepresentations. In the Representation Letter (which was filed as part of the
Registration Statement for BCAP 2007-AA2 as Exhibit V to the Trust Agreement),
Barclays Bank represents and warrants that certain representations and warranties made
by the originators, Countrywide Home Loans and Wells Fargo Bank, with respect to each
mortgage loan were not untrue “to the best of [Barclays Bank]’s knowledge.”
159. Among the representations and warranties that Barclays Bank represented were
not untrue included:
(a) Mortgage Loan Schedule. The information contained in the

Mortgage Loan Schedule is complete, true and correct in all
material respects;
(g) Compliance with Applicable Law. Any and all requirements of
any applicable federal, state or local law including, without
limitation, usury, truth in lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity,
disclosure and all anti-predatory and abusive laws applicable to the
Mortgage Loan including, without limitation, any applicable law
governing Prepayment Penalties, have been complied with;
160. Contrary to their representations, Defendants omitted the most important
information relevant to purchasers – information relating to the inability of the borrowers
to repay the mortgage loans and information related to the true value and quality of the
properties securing the mortgages. This information was available to the Defendants, but
Defendants intentionally concealed this information from purchasers. As explained
above, Defendants intentionally did not provide to investors the name of the borrowers or
the addresses of the properties, even though they knew this information. Defendants’
decision left investors unable to conduct their own due diligence on the mortgage loans
and unable to evaluate the ability of borrowers to repay their loans. Defendants’
53
concealment and omission made it impossible for investors to determine if the
information Defendants did provide in the Offering Documents was accurate.
161. Instead, MBS purchasers were forced to rely exclusively on the disclosures in the
Registration Statements about the MBS and the Offering Documents about each CDO
and on Defendants’ representations and warranties in the related Representation Letters,
Pooling and Servicing Agreement and/or Assignment Agreements and/or Mortgage Loan
Purchase Agreements.
162. The risk that these representations and warranties were inaccurate or incomplete
was allocated to Defendants and to the original loan sellers through the “cure or
repurchase” obligation. By way of example, the prospectus supplement for SABR 2007-
BR5 provides as follows:
Pursuant to the Barclays Representation Agreement, within sixty

days of the earlier to occur of Barclays' discovery or its receipt of
notice that any of the representations and warranties contained in
the Barclays Representation Agreement have been breached in any
material respect as of the date made, with the result that the value
of, or the interests of the issuing entity or the holders of the
certificates in the related mortgage loan were materially and
adversely affected, Barclays will be required to:
o cure such breach in all material respects,
o if prior to the second anniversary of the closing date,
remove each mortgage loan which has given rise to the
requirement for action by the applicable representing party,
substitute one or more Substitute Mortgage Loans and, if the
outstanding principal balance of such Substitute Mortgage Loans
as of the date of such substitution is less than the outstanding
principal balance, of the replaced mortgage loans as of the date of
substitution, deliver to the issuing entity as part of the amounts
remitted by the servicer on such distribution date the amount of
such shortfall (a "Substitution Adjustment Amount"), or
o purchase such mortgage loan at a price equal to the unpaid
principal balance of such mortgage loan as of the date of purchase,
plus all related accrued and unpaid interest, plus the amount of any
unreimbursed servicing advances made by the servicer or other
54
expenses of the servicer or the trustee in connection with the
mortgage loan or the purchase.
163. The “cure or repurchase” obligations disclosed in the prospectus supplement for
SABR 2007-BR5 are summaries of Barclays Bank’s obligations from the Barclays
Representations Letter. Sections 3 and 4 of the Barclays Representation Letter for SABR
2007-BR5 provides:
Section 3. Purchase or Substitution Obligation for Breach of a

Representation or Warranty with Respect to the Mortgage Loans.
(a) Within sixty (60) days of the earlier of either discovery by or
notice to BBPLC of any breach of a representation or warranty
which materially and adversely affects the value of the Mortgage
Loans or the interest of the Depositor therein (or which materially
and adversely affects the value of the applicable Mortgage Loan or
the interest of the Depositor therein), BBPLC shall cure such
breach in all material respects and, if such breach cannot be cured,
BBPLC shall, within sixty (60) calendar days of BBPLC's receipt
of request from the Depositor, purchase such Mortgage Loan at the
Repurchase Price. In the event that such a breach shall involve any
representation or warranty set forth in Section 2 of this Agreement,
and such breach cannot be cured within sixty (60) days of the
earlier of either discovery by or notice to BBPLC of such breach,
all of the Mortgage Loans materially and adversely affected
thereby shall be purchased by BBPLC at the Repurchase Price. . . .
Section 4. Document Delivery Requirements with Respect to the
Mortgage Loans.
BBPLC shall deliver to the Depositor all documents and
instruments required under Section 2.01 of the Pooling and
Servicing Agreement with respect to the Mortgage Loans. In the
event any document or instrument required to be delivered to the
Depositor pursuant to Section 2.01 of the Pooling and Servicing
Agreement, including an original or copy of any document
submitted for recordation to the appropriate public recording
office, is not so delivered to the Depositor, and in the event that
BBPLC does not cure such failure within sixty (60) days of
discovery or receipt of written notification of such failure from the
Depositor, BBPLC shall, at the Depositor's option, purchase such
Mortgage Loan at the Repurchase Price, together with all expenses
incurred by the Depositor as a result of such purchase.
55
164. Similarly, the “cure or repurchase” obligations from the Representation Letter
from BCAP 2007-AA2 provides:
Repurchase of Mortgage Loans

In the event of a breach by BBPLC of its representations and
warranties above that materially and adversely affects
Certificateholders, BBPLC shall repurchase each such Mortgage
Loan within 60 days of the earlier of discovery or receipt of notice
of breach with respect to each such Mortgage Loan at the
Repurchase Price set forth in the Trust Agreement.
165. Defendants’ prospectus supplements included material misstatements about the
properties, both on an individual loan basis and on a pool basis. The prospectus
supplements for each MBS sets forth in tabular form the number and/or percentage of
mortgage loans with Loan-to-Value (LTV) ratios and/or Combined Loan-to-Value
(CLTV) within specified ranges.13 The prospectus supplements also list the weighted
average LTVs and/or CLTVs for the pools of mortgage loans. The Loan Tapes for the
MBS also represent the LTV and CLTV ratios for each loan. For all the MBS, the
prospectus supplement specifies the maximum LTV and/or the CLTV ratios for any loan
in the related pool.
1. DEFENDANTS FALSELY CLAIMED THAT NO LTV or CLTV

RATIOS WERE ABOVE 100%
13
The prospectus supplement for SABR 2007-BR5 defines the “loan-to-value ratio” and the "combined loan-to-
value ratio" as follows:
The "loan-to-value ratio" of a mortgage loan at any time is defined generally as the ratio of the principal balance of
such mortgage loan at the date of determination to (a) in the case of a purchase, the least of the sale price of the
mortgaged property, its appraised value at the time of sale and its appraisal review value or (b) in the case of a
refinancing or modification, the lesser of the appraised value of the mortgaged property at the time of the
refinancing or modification and its appraisal review value.
The "combined loan-to-value ratio” of a mortgage loan at any time is defined generally as the ratio of the principal
balance of the second-lien mortgage loan, together with the outstanding balance of the related first-lien mortgage
loan, at the date of determination to (a) in the case of a purchase, the lesser of the sale price of the mortgaged
property, the appraisal review value and its appraised value at the time of sale, or (b) in the case of a refinancing or
modification, the lesser of the appraisal review value and the appraised value of the mortgaged property at the time
of the refinancing or modification.
56
166. The prospectus supplement for SABR 2007-BR5 stated that no loan had an LTV
ratio above 100% and that the weighted average original LTV ratio of the pool was
78.36%. The prospectus supplement for SABR 2007-BR5 also stated that no loan had a
CLTV ratio above 100% and that the weighted average original CLTV ratio of the pool
was 82.28%. Based on Relator’s information, a material number of the reviewed
properties had CLV and CLTV ratios above 100% (due to inflated appraisals/property
valuations) and that most of the values were inflated so that the weighted average original
LTV ratio of the pool was significantly greater than 78.66% and the weighted average
original CLTV ratio was significantly greater than 82.28%.
167. Relator’s information demonstrates that the appraisals and property valuations
given to the reviewed properties were significantly higher than the actual value of such
properties on the date the related loan was made. As a result, the LTV and CLTV ratios
represented in the tables contained in the prospectus supplements for each MBS were
materially understated as were a material number of the LTV and CLTV ratios for the
individual loans set forth in the loan tapes. The denominator in the LTV and CLTV ratio
is the value of the mortgaged property. An inflated appraisal will understate the collateral
risk associated with a given loan.
168. The best evidence of actual value is an arms-length sale of a property. Relator’s
information demonstrates that many collateral properties securing the relevant loans were
significantly overvalued. If a property’s true value is significantly less than the value
used for loan underwriting, then there is an increased risk a borrower will not repay the
loan and a risk of greater losses in the event of a default. Mortgage loans with high loan-
to-value ratios leave the borrower with little or no equity in the mortgaged property.
57
Relator’s information shows most of the mortgage loans included in the MBS trusts had
negative equity from the outset (i.e., the property was worth less than the amount of a
loan and LTVs were in excess of 100% at the time a loan was made).
169. Relator uncovered inaccuracies in reported LTV ratios in the prospectus
supplements for BCAP 2007-AA2 and SABR 2007-BR5 and other Barclays MBS trusts.
These inaccuracies reveal that Defendants’ appraisal process was reckless and flawed.
The Registration Statements indicate that the appraisers will be qualified, licensed and
independent, that the appraisals will reflect the true value of a collateral property, that the
property will be in good condition, and that the appraisers’ compensation will not be
dependent upon the amount of the loan or its consummation.
170. Relator’s information reveals that the appraisals of the properties securing the
BCAP 2007-AA2 and SABR 2007-BR5 loans did not reflect the actual value of the
underlying properties. Independent appraisers following proper practices, and providing
genuine estimates as to valuation, would not have provided the inflated values as shown
on the loan tapes.
171. Defendants knew or should have known about the inflated appraisals. Barclays
Bank provided credit lines to third party originators and constantly monitored the
inventory backing the credit lines. Defendants represent in the prospectus for each MBS
that “[p]rior to acquiring any residential mortgage loans, Barclays conducts a review of
the related mortgage loan seller” and “conduct[s] an underwriting guideline review. . . .
The underwriting guideline review entails a review of the mortgage loan origination
processes and systems.”
58
172. Defendants knew or should have known inflated values were a pervasive problem.
Defendants were aware (or should have been aware) that mortgage loans sold to the
MBS, and mortgage loans backing RMBS sold to the CDOs, were products of inflated
values. Nevertheless, Defendants did not disclose these material facts regarding inflated
values (or include a risk factor about inflated values) in the Registration Statements for
the MBS or the Offering Documents for the CDOs.
B. DEFENDANTS AFFIRMATIVELY MISREPRESENTED PROPER

DELIVERY AND ASSIGNMENT OF LOAN DOCUMENTS
173. As described above, the prospectuses for the MBS represent that BCAP, the
depositor for all the Barclays MBS, would deliver certain documents to the trustee or the
custodian, including (a) the original mortgage notes endorsed in blank by the last
endorsee, including all intervening endorsements showing a complete chain of
endorsement from the originator to the last endorsee; (c) the related original mortgage
and evidence of its recording; and (e) mortgage assignment(s), or copies of them certified
by the applicable originator, escrow company, title company, or closing attorney, if any,
showing a complete chain of assignment from the originator of the related mortgage loan
to the last endorsee.
174. The risk that BCAP failed to deliver the original note and the other required
mortgage documents was in certain instances allocated to Defendants through the cure or
repurchase obligations. For example, with respect to SABR 2007-BR5, Barclays Bank is
required, pursuant to Section 4 of the Representations and Warranties Agreement, to
repurchase any Mortgage Loan for which any document is not delivered that BCAP is
required to deliver to the SABR 2007-BR5 trust as required by Section 2.01 of the
Pooling and Servicing Agreement. In addition, Barclays Bank is required, pursuant to
59
Section 3 of the Representations and Warranties Agreement, to cure or repurchase any
Mortgage Loan for which a breach of a representation, warranty or covenant made by
Barclays Bank with respect to such Mortgage Loan.
175. Defendants knew, on the date the MBS were issued, as of the date of each
prospectus supplement, mortgage loan purchase agreement, and representations and
warranties agreement that they would not deliver the original notes or valid assignments
to the related MBS trust on a timely basis – as was represented in the Registration
Statements. In fact, it was Defendants’ practice not to do so. Defendants purchased from
originators mortgage loans that would be sold by Defendants into the MBS trusts and had
the obligation to, and disclosed to purchasers that they would, deliver the original notes
and valid assignments in a timely manner. Defendants failed to do so for substantially all
the mortgage loans for each of the dozens of MBS transactions.
176. Defendants failed to disclose how many of the mortgage loans included in each
MBS trust were registered with MERS under the MERS System. Instead, Defendants
mislead investors by representing (by omission) that none of the mortgage loans would
be registered in the MERS system. The base prospectus for the Barclays MBS
represented that mortgage loans registered in the MERS system would not be included in
an MBS unless disclosed in the prospectus supplement 14 Neither the prospectus
supplement for BCAP 2007-AA2 nor SABR 2007-BR5 nor any of the other Barclays
MBS trusts disclosed that any MERS loans would be included in the trust. In violation of
14
The base prospectus provides that “[i]f so specified in the related prospectus supplement, and in accordance with
the rules of membership of Merscorp, Inc. and/or Mortgage Electronic Registration Systems, Inc. (MERS),
assignments of the mortgages for the mortgage loans in the related trust will be registered electronically through the
through the Mortgage Electronic Registration Systems, Inc., or MERS® System.”
60
such disclosure, Barclays used MERS as a nominee for many of the loans included in the
MBS trusts.
177. As described above, Defendants furthered their fraud on investors by failing to
file assignments in the name of the MBS trusts. This allowed Defendants to conceal from
investors the names of the borrowers and the addresses of the properties securing the
mortgage loans owned by the MBS trusts. By filing the mortgages in the name of
“MERS” and registering the assignment to the trust in the “MERS System,” the
Defendants were able to further their fraud because investors had no way to determine
what mortgage loans a MBS trust owns. While the base prospectuses for the MBS
mentioned that some mortgage loans may be held through the MERS System (if specified
in the related prospectus supplement), the Defendants failed to specify that loans were so
held. Defendants also failed to disclose how many or what percentage of mortgage loans
were held in the MERS System. Relator’s information reveals that for many of the loans
held by the MBS trust, the mortgages were in the name of MERS. Defendants
intentionally omitted disclosing the high percentage of mortgages registered in the MERS
System owned by the MBS trust, information material to investors. In fact, Defendants
intentionally mislead investors by disclosing that loans would only be held in the MERS
System if specified in the related prospectus supplement, and then including MERS loans
without specifying such in the prospectus supplements. Failing to disclose this
information made the offering documents for the Barclays MBS false and misleading.
178. Defendants understood the risks to the MBS of holding mortgage loans through
the MERS System yet failed to disclose such risks to investors. Defendants failed to
include a MERS risk factor in the MBS prospectus supplements notwithstanding
61
Defendants’ knowledge of the risks associated with foreclosing on mortgages held
through the MERS System without recording an assignment of the mortgage or having
possession of the original note. As a legal matter, such an assignment to the applicable
MBS trust is necessary under applicable law to commence any foreclosure proceeding
because MERS as nominee does not have standing to commence foreclosure proceedings.
It was common practice in the industry to include such a risk factor in the registration
statements, yet Defendants failed to include one. For this reason, failure to include a
MERS risk factor makes the prospectus for the Barclays MBS false and misleading.
179. In addition to omitting material facts regarding (i) the credit quality of borrowers,
(ii) the overvaluation of properties contained in the Registration Statements, and (iii) the
assignment of mortgage loans, the Registration Statements also contained false
statements about credit ratings and compliance with underwriting guidelines.
C. THE CREDIT RATINGS WERE MATERIALLY FALSE
180. Credit ratings are assigned to the tranches of securities in mortgage-backed
securitizations by the credit rating agencies, including Moody’s Investors Service,
Standard & Poor’s, and Fitch Ratings. In general, a AAA rating is at the top of the credit
rating scale and is intended to designate the safest investments. At the time the MBS and
CDOs were rated, AAA investments historically experienced a loss rate of less than .05
percent and investments with a BBB rating historically experienced a loss rate of less
than one percent. As a result, RMBS securities with credit ratings between AAA or its
equivalent through BBB or its equivalent were generally referred to as “investment
grade.”
181. Each tranche in a MBS and CDO received a credit rating upon issuance, which
purported to describe the riskiness of that tranche. Barclays reported the credit ratings for
62
each tranche in the Prospectus Supplements for the MBS and Offering Documents for the
CDOs. The accuracy of these ratings was material to a reasonable purchaser’s decision
to purchase the securities.
182. Defendants provided portfolio and loan-level information to the rating agencies
that they relied upon to assign ratings to the MBS, including the borrower’s LTV ratio,
debt-to-income ratio, owner occupancy status, and other loan-level information. Because
Defendants knew or should have known (acting with reckless disregard for the truth) that
the information they provided to the rating agencies was false, Defendants knew or
should have known that the ratings set forth in the related prospectus supplement for each
MBS were inflated, incorrect and misleading. In addition, the level of subordination that
the rating agencies required for the respective class of MBS was inadequate to provide
purchasers with the level of protection that those ratings signified. As a result, purchasers
paid Defendants inflated prices for the MBS and CDOs, unaware that the securities they
purchased or otherwise acquired actually carried a materially higher risk of loss than
represented by the ratings.
D. DEFENDANTS FAILED TO COMPLY WITH UNDERWRITING

GUIDELINES DESPITE REPRESENTING TO THE CONTRARY IN THE
OFFERING DOCUMENTS
183. Relator’s information demonstrates that Defendants failed to conduct adequate
and sufficient due diligence to ensure that the mortgage loans sold to the MBS trusts were
not defective and otherwise complied with the representations in the Registration
Statements.
184. Based on Relator’s information, it appears that none of Barclays Capital, Barclays
Bank, Sutton, nor BCAP applied any standards in approving loans included in the MBS
trusts (i.e. there were no standards). Apparently, Barclays Bank, Sutton and BACP
63
would approve and purchase loans where the borrowers clearly did not have the ability to
repay and where the property securing the loan was significantly or grossly overvalued,
and would include such loans in the MBS trusts. The Registration Statements were false
and misleading because they represented that each loan would conform to the stringent
underwriting standards described in detail therein, which would ensure that each
borrower was credit worthy and each property would provide adequate security. The
Registration Statements failed to disclose that in practice, such underwriting standards
were not applied.
185. Defendants’ guidelines required them to, and the disclosure in the Registration
Statements stated that they would, conduct due diligence on each mortgage loan pool
purchased from third party originators and would conduct an “underwriting guideline
review” of the third party originators, which entails a review of the mortgage loan
origination processes and systems” in order to ensure the originator’s compliance with its
stated underwriting guidelines. Relator’s information reveals that most of the mortgage
loans sold to the MBS trusts should have been excluded. Defendants knowingly did not
ensure these mortgage loans were underwritten in accordance with applicable guidelines
(or had compensating factors). Barclays Bank and Sutton (at the direction of Barclays
Bank) purchased such loans, and BCAP sold such mortgage loans to the MBS trusts
knowing they did not meet the guidelines.
186. Relator’s information reveals that most of the loans sold to the MBS trusts did not
conform to the underwriting standards of the third-party originators that were disclosed in
the Registration Statements. This evidence demonstrates that Barclays Bank and Sutton
did not conduct the due diligence on the mortgage loan origination processes and systems
64
of the third party originators as represented in the prospectus supplements. Barclays also
promised an additional level of protection – Defendants claimed that they conducted loan
level reviews of the loans purchased from third party sellers. Relator’s information
shows that most of the mortgage loans did not meet the originator’s underwriting
guidelines. Defendants knew (or should have known) that there were high percentages of
defective loans but included such loans in the MBS trusts anyway. Defendants failed to
disclose this material information in the Offering Documents.
187. The prospectus supplements for each MBS described the mortgage loan
underwriting guidelines. Each prospectus supplement stresses that these guidelines were
applied to the loans and were intended to assess the creditworthiness of the borrower, the
ability of the borrower to repay the loan, and value of a collateral property as adequate
security for the loan.
188. For example, the prospectus supplement for the SABR 2007-BR5 trust purports to
describe the underwriting standards pursuant to which the loans were originated. In
describing the New Century underwriting standards, the prospectus supplement for
SABR 2007-BR5 states:
The New Century Underwriting Guidelines are primarily intended

to assess the borrower's ability to repay the mortgage loan, to
assess the value of the mortgaged property and to evaluate the
adequacy of the property as collateral for the mortgage loan. . .
While NCMC's primary consideration in underwriting a mortgage
loan is the value of the mortgaged property, NCMC also considers,
among other things, a borrower's credit history, repayment ability
and debt service-to-income ratio, as well as the type and use of the
mortgaged property.
The mortgage loans will have been originated in accordance with

the New Century Underwriting Guidelines. On a case-by-case
basis, exceptions to the New Century Underwriting Guidelines are
made where compensating factors exist. It is expected that a
65
substantial portion of the mortgage loans in the mortgage pool will
represent these exceptions.
Each applicant completes an application that includes information

with respect to the applicant's liabilities, income, credit history,
employment history and personal information. The New Century
Underwriting Guidelines require a credit report on each applicant
from a credit reporting company. The report typically contains
information relating to matters such as credit history with local and
national merchants and lenders, installment debt payments and any
record of defaults, bankruptcies, repossessions or judgments.
Mortgaged properties that are to secure mortgage loans generally
are appraised by qualified independent appraisers. These appraisers
inspect and appraise the subject property and verify that the
property is inacceptable condition. Following each appraisal, the
appraiser prepares a report that includes a market value analysis
based on recent sales of comparable homes in the area and, when
deemed appropriate, replacement cost analysis based on the current
cost of constructing a similar home. . . .The New Century
Underwriting Guidelines require a review of the appraisal by a
qualified employee of NCMC or by an appraiser retained by
NCMC.
Under each of [New Century’s loan] programs, NCMC reviews the

applicant's source of income, calculates the amount of income
from sources indicated on the loan application or similar
documentation, reviews the credit history of the applicant,
calculates the debt service-to-income ratio to determine the
applicant's ability to repay the loan, reviews the type and use of the
property being financed, and reviews the property. In determining
the ability of the applicant to repay the loan, a qualifying rate has
been created under the New Century Underwriting Guidelines that
generally is equal to the interest rate on that loan. The New
Century Underwriting Guidelines require that mortgage loans be
underwritten in a standardized procedure which complies with
applicable federal and state laws and regulations and requires New
Century's underwriters to be satisfied that the value of the property
being financed, as indicated by an appraisal and a review of the
appraisal, currently supports the outstanding loan balance.
189. For example, the prospectus supplement for the BCAP 2007-AA2 describes the
underwriting guidelines of both Countrywide Home Loans and Wells Fargo Bank
pursuant to which the mortgage loans were represented to have been originated. In
66
describing the Countrywide underwriting standards, the prospectus supplement for BCAP
2007-AA2 states:
Countrywide Home Loans' underwriting standards are applied by

or on behalf of Countrywide Home Loans to evaluate the
prospective borrower's credit standing and repayment ability and
the value and adequacy of the mortgaged property as collateral.
Under those standards, a prospective borrower must generally
demonstrate that the ratio of the borrower's monthly housing
expenses (including principal and interest on the proposed
mortgage loan and, as applicable, the related monthly portion of
property taxes, hazard insurance and mortgage insurance) to the
borrower's monthly gross income and the ratio of total monthly
debt to the monthly gross income (the "debt-to-income" ratios) are
within acceptable limits. . . .
The maximum acceptable debt-to-income ratio, which is

determined on a loan-by-loan basis varies depending on a number
of underwriting criteria, including the Loan-to-Value Ratio, loan
purpose, loan amount and credit history of the borrower. In
addition to meeting the debt-to-income ratio guidelines, each
prospective borrower is required to have sufficient cash resources
to pay the down payment and closing costs. Exceptions to
Countrywide Home Loans' underwriting guidelines may be made
if compensating factors are demonstrated by a prospective
borrower. . . .
The nature of the information that a borrower is required to

disclose and whether the information is verified depends, in part,
on the documentation program used in the origination process. In
general under the Full Documentation Loan Program (the "Full
Documentation Program"), each prospective borrower is required
to complete an application which includes information with respect
to the applicant's assets, liabilities, income, credit history,
employment history and other personal information. Self employed
individuals are generally required to submit their two most recent
federal income tax returns. Under the Full Documentation
Program, the underwriter verifies the information contained in the
application relating to employment, income, assets and mortgages.
190. The prospectus supplement for BCAP 2007-AA2 then goes on to stress the
maximum loan-to-value ratios and debt-to-income ratios permitted under the “standard”
and “expanded” Countrywide Home Loan programs, all in an attempt to provide the
67
investor comfort that Countrywide is careful to lend only to borrowers that are able to
repay the mortgage loan:
Countrywide Home Loans' Standard Underwriting Guidelines for

mortgage loans with non-conforming original principal balances
generally allow Loan-to-Value Ratios at origination of up to 95%
for purchase money or rate and term refinance mortgage loans with
original principal balances of up to $400,000, up to 90% for
mortgage loans with original principal balances of up to $650,000,
up to 75% for mortgage loans with original principal balances of
up to $1,000,000, up to 65% for mortgage loans with original
principal balances of up to $1,500,000, and up to 60% for
mortgage loans with original principal balances of up to
$2,000,000.
For cash-out refinance mortgage loans, Countrywide Home Loans'

Standard Underwriting Guidelines for mortgage loans with non-
conforming original principal balances generally allow Loan-to-
Value Ratios at origination of up to 75% and original principal
balances ranging up to $650,000. . . .
Under its Standard Underwriting Guidelines, Countrywide Home

Loans generally permits a debt-to-income ratio based on the
borrower's monthly housing expenses of up to 33% and a debt-to-
income ratio based on the borrower's total monthly debt of up to
38%.
Countrywide Home Loans' Expanded Underwriting Guidelines for

mortgage loans with non-conforming original principal balances
generally allow Loan-to-Value Ratios at origination of up to 95%
for purchase money or rate and term refinance mortgage loans with
original principal balances of up to $400,000, up to 90% for
mortgage loans with original principal balances of up to $650,000,
up to 80% for mortgage loans with original principal balances of
up to $1,000,000, up to 75% for mortgage loans with original
principal balances of up to $1,500,000 and up to 70% for mortgage
loans with original principal balances of up to $3,000,000. Under
certain circumstances, however, Countrywide Home Loans'
Expanded Underwriting Guidelines allow for Loan-to-Value
Ratios of up to 100% for purchase money mortgage loans with
original principal balances of up to $375,000.
For cash-out refinance mortgage loans, Countrywide Home Loans'

Expanded Underwriting Guidelines for mortgage loans with non-
conforming original principal balances generally allow Loan-to-
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Value Ratios at origination of up to 90% and original principal
balances ranging up to $1,500,000.
Under its Expanded Underwriting Guidelines, Countrywide Home

Loans generally permits a debt-to-income ratio based on the
borrower's monthly housing expenses of up to 36% and a debt-to-
income ratio based on the borrower's total monthly debt of up to
40%; provided, however, that if the Loan-to-Value Ratio exceeds
80%, the maximum permitted debt-to-income ratios are 33% and
38%, respectively.
191. In describing the Wells Fargo underwriting standards, the prospectus supplement
for BCAP 2007-AA2 states:
Wells Fargo Bank's underwriting standards are applied by or on

behalf of Wells Fargo Bank to evaluate the applicant's credit
standing and ability to repay the loan, as well as the value and
adequacy of the mortgaged property as collateral. The
underwriting standards that guide the determination represent a
balancing of several factors that may affect the ultimate recovery
of the loan amount, including, among others, the amount of the
loan, the ratio of the loan amount to the property value (i.e., the
lower of the appraised value of the mortgaged property and the
purchase price), the borrower's means of support and the
borrower's credit history. Wells Fargo Bank's guidelines for
underwriting may vary according to the nature of the borrower or
the type of loan, since differing characteristics may be perceived as
presenting different levels of risk. . . .
192. The prospectus supplement for BCAP 2007-AA2 then goes on to stress the
detailed information that Wells Fargo obtains on each borrower in order to provide
comfort to investors fort that Wells Fargo vets every borrower’s ability to repay:
A prospective borrower applying for a mortgage loan is required to

complete a detailed application. The loan application elicits
pertinent information about the applicant, with particular emphasis
on the applicant's financial health (assets, liabilities, income and
expenses), the property being financed and the type of loan
desired. A self-employed applicant may be required to submit his
or her most recent signed federal income tax returns. With respect
to every applicant, credit reports are obtained from commercial
reporting services, summarizing the applicant's credit history with
merchants and lenders. Generally, significant unfavorable credit
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information reported by the applicant or a credit reporting agency
must be explained by the applicant. . . .
Verifications of employment, income, assets or mortgages may be

used to supplement the loan application and the credit report in
reaching a determination as to the applicant's ability to meet his or
her monthly obligations on the proposed mortgage loan, as well as
his or her other mortgage payments (if any), living expenses and
financial obligations. A mortgage verification involves obtaining
information regarding the borrower's payment history with respect
to any existing mortgage the applicant may have. This verification
is accomplished by either having the present lender complete a
verification of mortgage form, evaluating the information on the
credit report concerning the applicant's payment history for the
existing mortgage, communicating, either verbally or in writing,
with the applicant's present lender or analyzing cancelled checks
provided by the applicant. Verifications of income, assets or
mortgages may be waived under certain programs offered by Wells
Fargo Bank, but Wells Fargo Bank's underwriting guidelines
require, in most instances, a verbal or written verification of
employment to be obtained.
193. Relator’s information shows that Barclays and the third party originators
systematically disregarded their respective underwriting guidelines. This conclusion is
confirmed by the systematically misreported owner occupancy, LTV, and DTI statistics
uncovered by Relator’s loan-level review. The conclusions from Relator’s information
are supported by (1) the collapse of the MBS’ credit ratings, (2) the surge in delinquency
and default in the mortgages purportedly securing the MBS, and (3) the low recovery
amounts in the mortgaged property securing the mortgage loans.
194. Defendants had the opportunity to review the loan files for each loan as part of
their due diligence in the securitization process, and stated in the prospectus that Barclays
Bank would undertake due diligence on the loans it acquired from the originators. The
prospectuses implied that the due diligence would be greater for mortgage loans of lower
credit quality. The prospectuses also represented that Barclays would review the
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mortgage loan sellers, including an underwriting guideline review of the mortgage loan
sellers’ origination practices and systems. Had Defendants undertaken that review of the
mortgage loan portfolios and originators, they would have discovered that the actual
underwriting practices of the originators, including the non-party originators listed above,
were vastly inconsistent with the statements in the Registration Statements regarding the
high underwriting standards of the third party originators.
195. Relator’s information reveals that the third party originators that sold loans to
Barclays Bank or to Sutton, and which were included by Barclays in the MBS trusts, had
serious underwriting breakdowns. The statements regarding compliance with the
underwriting guidelines of such originators in the Registration Statements were false or
materially misleading.
196. Defendants included these false and misleading statements in order to make
investors comfortable with the quality of the mortgage loan originators and the specific
loan portfolios included in each MBS trust, to induce investors not to conduct their own
due diligence and not to ask further questions about the mortgage loans, including about
the names and addresses of the borrowers.
197. Because the rating agencies assigned ratings to the MBS based on information
about the mortgage collateral provided by the Defendants, the ratings on the MBS were
artificially inflated because the information about the mortgage loan collateral provided
by the Defendants was false and misleading. Defendants made the very same material
omissions and misrepresentations to the rating agencies that they made to investors in the
Registration Statements. These omissions and misrepresentations were reflected in the
artificially inflated ratings on the MBS.
71
198. Since the issuance of the MBS, the rating agencies have dramatically downgraded
their ratings, reflecting the true underwriting practices used to originate the mortgage
loans, and the true value and credit quality of the mortgage loans. For example, the
ratings on the Class A-2B Certificates (CUSIP 81379EAB8) issued by SABR 2007-BR5
which were initially rated AAA by Moody’s at issuance in July 2007 were downgraded to
B1 on October 22, 2008, to Caa2 on March 20, 2009, and to Ca on July 12, 2010.
199. For example, the ratings on the Class I-2-A-1 Certificates (CUSIP 05530NAA5)
issued by BCAP 2007-AA2, which were initially rated AAA by Moody’s at issuance in
March 2007 were downgraded to Caa3 in January 2009, were placed on review for
possible downgrade in January 2010, and were downgraded to Ca on November 11,
2010. The other Barclays MBS have suffered similar ratings downgrades.
200. Relator’s information has revealed massive delinquency and default rates of the
loans backing the MBS, clear proof that the loans were not originated in adherence to the
stated underwriting guidelines. The majority of the MBS purchased or funded by the
U.S. Government were rated A to AAA and were represented as long-term, stable
investments. However, a significant percentage of the loans backing the MBS have
defaulted, been foreclosed, or are delinquent, resulting in massive losses to holders. The
overall poor performance of the loans is a direct consequence of the fact that they were
defective from the start and not underwritten in accordance with the applicable
underwriting guidelines as represented in the Registration Statements.
201. If any loans were underwritten in accordance with the standards represented in the
Registration Statements, then the MBS would have experienced substantially fewer
defaults, fewer foreclosures, fewer delinquencies and higher recovery amounts upon
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foreclosure than occurred for loans purportedly securing the MBS. If any loans were
underwritten using the appraisal, valuation methods and standards represented in the
Registration Statements, then the MBS would not have experienced the massive losses
demonstrated by Relator’s information.
E. DEFENDANTS OMITTED AND MISREPRESENTED MATERIAL

INFORMATION IN THE OFFERING DOCUMENTS FOR THE CDOS
202. In connection with each CDO transaction, Barclays Capital created a
marketing/pitch book and/or term sheet that described the key features and terms of the
deal. Specific information about the collateral manager’s history and business experience
was prepared by the collateral manager, but otherwise the information was created by
Barclays Capital. After the pitch book and/or term sheet was delivered to purchasers,
Barclays Capital would prepare an offering circular, which also described the terms of the
CDO transaction, including the capital structure, the collateral debt securities, the
manager, and certain risk factors.15 Often, as part of the Offering Documents, Barclays
Capital would provide purchasers with historical performance analysis that showed very
low default and loss rates, and high recovery rates, on mortgage related securities such as
RMBS, which suggested that the default cushions on the CDO securities provided in the
Offering Documents were more than sufficient to protect the investment.16 The Offering
15
The offering circulars for the CDOs would often state that it was prepared by the co-issuers, which are special
purpose entities that had no employees and were created solely to purchase the collateral debt securities and issue
notes. Barclays Capital was the sponsor, structurer, arranger, initial purchaser and placement agent for each CDO
transaction. Barclays Capital, not the co-issuers, actually prepared the Offering Circulars and any representation to
the contrary in the Offering Documents is false. See United States SEC v. Citigroup, 11 Civ. 7387 (JSR), 2011 U.S.
Dist. LEXIS 135914 at*14-*15 (S.D.N.Y. Nov. 28, 2011), at ¶ 39. Investors did not have contact with the co-
issuers and each purchased securities in the CDOs directly from Barclays Capital, which was the initial purchaser
and placement agent. Barclays Capital disseminated the Offering Circular and pitch book for the CDOs directly to
purchasers, not the issuers.
16
The Offering Documents would often provide a break-even statistical default analysis that was an important
metric for evaluating the aggregated risk of default of the thousands of mortgages and MBS that served as the
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Documents were prepared by the CDO desk at Barclays Capital and were distributed by
the marketing staff employed by Barclays Capital’s CDO desk to the Failed Credit
Unions, the Failed Banks, the Failed Pension Plans and the other Government Entities
that the marketing staff covered. Such entities reasonably relied on the Offering
Documents.
203. Defendants’ false statements and material omissions made in connection with the
Offering Documents have never been retracted and have endured in form and effect to the
present. Thus all financing, guarantees, insurance, and payments associated with the
CDOs made by the U.S. Government were made further to and in view of Defendants’
false statements, including the Offering Documents.
204. As described above, the Defendants purchased large numbers of defective loans
and included them as collateral for the MBS. Barclays Capital would then sell its unsold
inventory of MBS (and other CDOs) to the CDOs. However, Barclays Capital failed to
disclose to purchasers of the CDOs the same material information Defendants failed to
disclose to purchasers of the MBS described above.
205. The Offering Documents for each CDO represented that the collateral was
comprised of a certain percentage of “mortgage backed securities.” However, each of
these representations was false and misleading because the securities that purportedly
were mortgage backed were not secured by notes and mortgages. As demonstrated by
Relator’s information and described above, because neither valid assignments nor
original notes were delivered to the MBS trusts which were collateral for the CDOs,
collateral for the CDOs. These risks appeared low in light of the default cushions built into the CDOs relative to
historical performance provided by Barclays Capital, assuming the collateral was similar as suggested by Barclays
Capital. However, Barclays Capital knew the mortgage collateral in the CDOs was not similar to mortgage loans,
which formed the basis of the historical performance data provided to investors.
74
those MBS trusts never legally owned the notes and related mortgages. Simply put, the
MBS were not “mortgage backed securities” as defined by the Offering Documents.
206. Barclays Capital failed to disclose to CDO purchasers the same information it
failed to disclose to MBS purchasers, including the poor borrower credit backing the
notes and the inflated property valuations of the property securing the mortgages that
were purportedly owned by the MBS trusts that issued the RMBS used as collateral for
the CDOs. Barclays Capital also did not disclose to purchasers of the CDOs material
information regarding instances of fraudulent and/or poor underwriting by the third-party
loan originators who sold mortgage loans to certain of the Defendants (who then sold
such loans to purchasers of the MBS or to sponsors of RMBS which were used as
collateral for CDOs). Instead, Barclays Capital sold MBS and RMBS to the CDOs which
it knew, or should have known, were secured by mortgage loans which were both
defective and which did not conform to the underwriting standards set forth in the
Prospectus Supplements for such MBS or RMBS.
1. BARCLAYS PURCHASED CREDIT PROTECTION FROM AIG

AND SOLD CDOS TO MAIDEN LANE III
207. During the period that Barclays Capital issued CDOs, Barclays also entered credit
default swaps with AIG which allowed Barclays to purchase protection on certain CDOs.
A credit default swap is like an insurance policy on a security – the buyer of protection
(in this case Barclays) pays the insuring party (in this case AIG) periodic insurance
payments and in exchange the insuring party (AIG) will pay the insured (Barclays)
certain amounts in the event those CDOs do not perform well. In the event an insured
CDO lost market value, the credit default swaps required AIG to post collateral (i.e.,
transfer money) to Barclays for the loss of value of the CDOs.
75
208. As a result of its obligation to post collateral on its credit default swaps, between
September 2008 and December 2008, AIG paid approximately $900,000,000 to Barclays
and tens of billions more of cash to other counterparties. In November 2008, the FRBNY
and the U.S. Treasury created Maiden Lane III to “alleviate capital and liquidity
pressures on AIG associated with credit derivative contracts written by [AIG].” Maiden
Lane III received $24.3 billion from the FRBNY and $5 billion from AIG, which was
used to purchase CDOs from the swap counterparties of AIG, including Barclays.
Barclays was paid par (100% of principal) for the CDOs insured by AIG in exchange for
Barclays terminating the credit default swaps it had with AIG.17 According to disclosures
made by AIG, Barclays was paid $600 million for the CDOs and also retained the $900
million of cash previously paid by AIG ($1.5 billion total).
209. At the time that Barclays entered into the credit default contracts with AIG, and at
the time that Maiden Lane III purchased the CDOs from Barclays, Barclays failed to
disclose the same information it failed to disclose to the CDO and MBS purchasers.
Barclays failed to disclose information regarding the poor borrower credit and inflated
property valuations for notes and mortgages purportedly owned by MBS or RMBS used
as collateral for CDOs where Barclays purchased protection from AIG (and later sold to
Maiden Lane III). Barclays Capital also did not disclose to AIG or Maiden Lane III
material information regarding instances of fraudulent and/or poor underwriting by
Barclays or the third-party loan originators who sold mortgage loans to certain of the
17
According to the FRBNY website, “[t]he counterparties agreed to sell CDOs to ML III LLC in exchange for a
purchase payment from ML III LLC and their retention of collateral previously posted by AIGFP under the related
credit derivative contracts, for an overall consideration of par. In connection with any such purchase, each AIGFP
counterparty agreed to terminate the related credit derivative contracts between it and AIGFP.”
76
Defendants who then sold such loans to purchasers of the MBS or to sponsors of RMBS
used as collateral for such CDOs.
F. DEFENDANTS CONTROLLED AND DIRECTED EVERY STEP OF THE

SECURITIZATION PROCESS
210. Defendants are directly responsible for the omissions and misstatements of
material fact contained in the Registration Statements for the MBS because they
prepared, signed, filed and/or used those documents to market and sell the MBS, and/or
directed and controlled such activities and chose the trustee for each MBS trust.
211. As described above, Barclays Bank represented that the loans it purchased from
the third party originators included in the BCAP 2007-AA2 and SABR 2007-BR5 trusts
were originated in accordance with the underwriting criteria specified in the Registration
Statements. For each mortgage loan, Barclays Bank guaranteed the accuracy of the
information set forth on the Mortgage Loan Schedules.
212. Defendants were the source of all information about these mortgage loans
included in the MBS trusts and included in the Registration Statements since Defendants
purchased the loans and represented that they were in possession of the loan files for each
loan. Defendants are singularly to blame for the poor quality and haphazard diligence on
the loans included in BCAP 2007-AA2 and SABR 2007-BR5 trusts and other Barclays
MBS trusts.
213. Defendants selected the third party mortgage originators from which to obtain the
mortgage loans, selected the loans to include in each MBS trust, and chose the servicer of
the loans and the parties to administer the MBS trust. Defendants had regular contact,
and a direct contractual relationship, with the third party originators that originated the
mortgage loans. Barclays Bank provided warehouse lines to most of such third party
77
mortgage originators. The Registration Statements stated that Barclays Bank would
undertake due diligence on the loans it acquired from the originators. The prospectuses
implied that the due diligence would be greater for mortgage loans of lower credit
quality. The prospectuses also represented that Barclays would review the mortgage loan
sellers including an underwriting guideline review of the mortgage loan sellers’
origination practices and systems.
214. Defendants were also in the position to receive the documentation supporting
each mortgage loan (the “Loan File”), which typically includes the borrower’s loan
application, credit report, schedule of assets, liabilities and income, income, asset and
employment verifications, lien disclosures and appraisal of the subject property for each
mortgage loan purchased from third-party originators as part of their purchase.
Defendants selected the mortgage loans to place in each MBS trust with full access to
detailed information on each borrower and property and thus had the ability to ensure the
disclosures in the Offering Documents were both accurate and complete and did not
contain any omissions of material fact. Defendants had access to information to
determine whether the representations and warranties made by Barclays and/or the
mortgage loan sellers in the relevant pooling and servicing agreement, mortgage loan
purchase agreements and representations and warranties agreements were accurate. By
contrast, potential purchasers had only one source of information about the mortgage
loans: Defendants.
215. Potential purchasers had no means to verify the accuracy of information they
received from Defendants. Defendants intentionally omitted the names of the borrowers
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and the addresses of the collateral properties from the Registration Statements so that
investors could not do their own due diligence.
G. SALES OF RMBS TO AIG UNDER AIG’S SECURITIES LENDING

PROGRAM AND FALSE STATEMENTS MADE IN CONNECTION
THEREWITH
216. During the period that Defendants were issuing RMBS using false Offering
Documents as described herein, Barclays also entered into securities lending
arrangements with AIG which permitted Barclays to sell RMBS to AIG with funds
provided by Barclays. In a securities lending transaction, the lender (in this case
Barclays) lends money to a borrower with certain securities as collateral and the borrower
(in this case AIG) receives cash. In a typical transaction in a normal market environment,
AIG typically received cash equal to or exceeding the value of the securities deposited
with Barclays as collateral. AIG reinvested the cash it received from Barclays in order to
earn a profit on the transaction. As it transpired, Barclays and others convinced AIG to
reinvest that cash in RMBS.
217. Before the financial crisis, AIG was active in the securities lending market and
was a favorable counterparty because it had a strong credit rating. Because of its credit
rating and the high quality of its securities portfolio, AIG could borrow cash very cheaply
through securities lending transactions. Lenders would often provide AIG cash equal to
100% or more of the value of the collateral security. During the period from 2005 to
2007, AIG increased the size of its securities lending program and invested a majority of
the cash in MBS, including MBS issued by Barclays. Since MBS have long durations,
AIG’s investment in MBS created a maturity mismatch – the maturity dates of the MBS
were long but the terms of the securities loans which generated the cash for AIG to buy
the MBS were short. Prior to the financial crisis, AIG’s counterparties would routinely
79
renew these securities loans and not demand changes in the terms of the transactions.
When the financial crisis started, Barclays and others extracted stiffer terms from AIG,
including a higher interest rate on the cash and more collateralization.
218. Barclays was AIG’s single largest securities lending counterparty and a major
vendor of MBS to it. Barclays knew that AIG was using the funds it received from
Barclays to purchase Barclays MBS. As demonstrated by Relator’s information, Barclays
knew that the Barclays MBS that AIG purchased with the proceeds of its securities
lending program in reliance on the material omissions and misrepresentations on the
Offering Documents were defective and were declining in value. Barclays knew that
AIG could not repay securities borrowers in the event AIG was forced to sell the
Barclays MBS in order to repay securities borrowers. Therefore, Barclays demanded
better terms, in terms of rates and the amount of cash collateral, because it knew that AIG
had purchased Barclays MBS. In order to repay Barclays and other securities borrowers,
AIG was forced to sell MBS, including the Barclays MBS that it purchased in reliance on
the material omissions and misrepresentations in the Offering Documents, at a loss.
219. On October 3, 2008, AIG received a $37.8 billion bailout from the Treasury under
the Troubled Asset Relief Program (TARP) so that AIG could pay back AIG’s securities
lending counterparties. In connection with Barclay’s securities lending arrangements
with AIG, Barclays received $7 billion from the Government’s bailout of AIG (this is in
addition to the $1.5 billion that Barclays received for the CDOs).
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VII. THE U.S. GOVERNMENT FUNDED THE PURCHASE OF MBS AND CDOS
AND SUFFERED SUBSTANTIAL LOSSES
A. PURCHASES BY THE U.S. GOVERNMENT
220. The U.S. Government purchased or financed the purchase of MBS and CDOs
through many avenues, including, without limitation, through purchases by the Failed
Credit Unions, the Failed Banks, the Failed Pension Plans, the FRBNY, the Federal
Home Loan Banks, PPIFs, the Maiden Lane Entities, and Fannie Mae and Freddie Mac,
who each purchased or otherwise acquired billions of dollars of the MBS and CDOs with
funding provided by the U.S. Government, and through direct purchases by the Federal
Reserve and the Treasury (collectively, the “Government Purchasers”).
221. The Failed Credit Unions, Failed Banks and Failed Pension Plans were each
federally insured institutions and one or more of such entities purchased MBS and CDOs,
either directly or indirectly (including purchase of other CDOs that contained MBS or
CDOs as collateral).
222. In 2008, to respond to the financial crisis, the Federal Reserve Board authorized
the FRBNY to facilitate the formation of three Maiden Lane Entities, each of which is a
separate limited liability company. The assets and liabilities of each Maiden Lane Entity
are consolidated onto the books of the FRBNY and are essentially owned by the FRBNY.
The Maiden Lane Entities purchased or acquired Defendants’ MBS and CDOs.
223. On March 23, 2009, the U.S. Treasury, in conjunction with the FDIC and the
Federal Reserve Bank, announced the creation of the Public-Private Investment
Partnership (“PPIP”) of 2009, as a part of the government’s Financial Stability Plan.
Under the PPIP, the Treasury provides equity and debt financing to newly-formed public-
private investment funds (“PPIFs”) established by fund managers with investors for the
81
purpose of purchasing legacy securities from financial institutions. These securities
include non-GSE RMBS.18 The PPIF Managers purchased Defendants’ MBS.
B. DAMAGES TO THE U.S. GOVERNMENT IMPAIRED VALUE OF MBS
1. IMPAIRED VALUE OF MBS
224. Each of the Defendants named herein participated in purchasing from third-party
originators residential mortgage loans, which were included in the MBS trusts, and
selling the MBS to investors, including to the U.S. Government, using the false records
described herein. As set forth above, Defendants acted with reckless disregard for the
truth, and made false representations about the quality of the mortgage loans sold to the
MBS trusts, including at the time the MBS were acquired by the U.S. Government. Such
mortgage loans failed to conform to the underwriting standards of the originators and of
the Defendants and failed to conform to the representations and warranties in the pooling
and servicing agreements, trust agreements, assignment and assumption agreements,
representations and warranties agreements and mortgage loan purchase agreements as
disclosed in the Registration Statements and Offering Documents. Because of the false
loan-level information, inflated appraisals and other false records that Defendants
provided to the rating agencies to obtain high credit ratings on the MBS, the investment
grade MBS had inadequate subordination to absorb the massive losses from defective
loans and collateral properties.
18
According to a U.S. Treasury press release:
The PPIP is designed to encourage the transfer of certain illiquid legacy real estate-related assets off of the balance
sheets of financial institutions, restarting the market for these assets and supporting the flow of credit and other
capital into the broader economy. PPIP funds established under the legacy loan program will be established to
purchase troubled loans from insured depository institutions and PPIP funds established under the legacy securities
program to purchase from financial institutions legacy non-Agency RMBS and newly issued and legacy CMBS
originally AAA rated. PPIFs will have access to equity capital from the U.S. Treasury as well as debt financing
provided or guaranteed by the U.S. government.
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225. In addition, each of the Defendants named herein participated in creating the
MBS trusts that failed to include valid assignments or the original notes, and concealed
such material fact from purchasers, including from the U.S. Government. As described
herein, the Registration Statement for each of the MBS states that the original notes and
valid assignments would be delivered on the closing date for each MBS trust.
226. Because of the missing assignments and original notes, in any foreclosure action,
the MBS trust will be unable, or will have to expend significant funds, to prove that the
trust is entitled to foreclose on the property. This is true especially for mortgages that are
held in the name of “MERS” because MERS is not the owner of the mortgage note and
MERS as nominee cannot lawfully commence a foreclosure action. The amount the
MBS trusts will spend to prove they are entitled to foreclose is materially more than they
would have spent if the Defendants delivered the original notes or a valid assignment in a
timely manner as the Registration Statements stated had been done. In addition, the value
of the MBS must be discounted to account for the risk that a court may not recognize the
MBS trust as the legal owner of the note and mortgage, and may deny foreclosure on the
mortgaged property. The cost to establish that the MBS trust is the owner of a note and
mortgage is a financial harm to the U.S. Government, as a purchaser of the MBS.
227. In all, as a result of Defendants’ fraudulent conduct, the value of the MBS
acquired and currently owned by the U.S. Government have been substantially impaired.
228. The U.S. Government has realized losses on its purchases of MBS and CDOs as a
result of Defendants’ malfeasance. For example, one of the Failed Credit Unions
purchased $40,000,000 principal amount of the Class I-2-A-1 Certificates (CUSIP
05530NAA5) issued by BCAP 2007-AA2. The National Credit Union Administration,
83
as Liquidating Agent, acquired such BCAP 2007-AA2 securities as a legacy asset and
securitized such asset as part of the NCUA Guaranteed Note Program. The NCUA
transferred such security to the NCUA Guaranteed Notes Trust 2011-R4 in or around
May 2011 and payment on the notes issued by such trust is guaranteed by the NCUA and
backed by the full faith and credit of the United States. Since June 2011, the NCUA has
reported that the $40,000,000 Class I-2-A-1 Certificates of BCAP 2007-AA2 owned by
the NCUA 2011-R4 trust have suffered cumulative realized losses of $3,321,181.20, and
as a result the NCUA has suffered similar losses on its guaranty.
229. The FRBNY lost money on SABR 2007-BR5. On December 12, 2008, ML II
LLC acquired $169,142,000 principal amount of the Class A-2B Certificates (CUSIP
81379EAB8) issued by SABR 2007-BR5. According to the FRBNY, ML II lost
$11,573,396.12 on such securities.
2. IMPAIRED VALUE OF CDOS
230. Each of the Defendants named herein participated in originating the MBS used as
collateral for the CDOs. In addition, certain of the Defendants participated in purchasing
RMBS from third parties included in the CDOs and selling the CDOs to purchasers,
including to the U.S. Government (using the false documents described herein). As set
forth above, Barclays Capital, acting with reckless disregard of the truth, omitted material
information and made false representations about the quality of the MBS and RMBS
included as collateral in the CDOs and failed to disclose to purchasers the lack of
underwriting and quality control about the underwriting and acquisition of the mortgage
loans underlying the MBS trusts whose securities the CDOs acquired.
231. As underwriter of the CDOs, Barclays Capital knew or should have known if it
had conducted any due diligence, that the mortgage loans underlying the MBS used as
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collateral for the CDOs were defective, that the borrowers on the mortgage notes were
not credit worthy, that the value of the collateral security the mortgages was inflated, that
such mortgage loans failed to conform to the underwriting standards of the originators,
and that the investment grade credit ratings on such MBS were inflated and that such
MBS trusts were missing the original notes and lawful assignments of the mortgages.
232. As a result of Defendants’ misconduct, the value of the CDOs acquired, insured,
guaranteed or otherwise funded by the U.S. Government has been substantially impaired.
3. DAMAGE TO FANNIE MAE AND FREDDIE MAC
233. Fannie Mae and Freddie Mac (collectively, the GSEs) each purchased or insured
MBS and CDOs and incurred millions of dollars of losses on such securities based on
Defendants’ material omissions and misrepresentations, false statements and claims.
234. As a result of Defendants’ knowing, deliberate and reckless actions and the losses
sustained by Fannie Mae and Freddie Mac from the purchase of the MBS and CDOs (and
the defective mortgage loans), on September 6, 2008, the Director of FHFA placed
Fannie Mae and Freddie Mac into conservatorships pursuant to the Housing and
Economic Recovery Act of 2008 (“HERA”). The U.S. Government has had to pay in
excess of $180 billion to Fannie Mae and Freddie Mac.
235. Defendants’ knowing, deliberate and reckless conduct described herein has
affected the investors in the GSEs, including numerous federally insured financial
institutions (including the Failed Banks, Failed Credit Unions and the Failed Pension
Plans) who incurred stock losses and unpaid dividends resulting from the conservatorship
of the GSEs. The placement of Fannie Mae and Freddie Mac into conservatorship wiped
out virtually all of the value of the outstanding preferred stock in the two companies.
85
4. DAMAGES TO THE FAILED CREDIT UNIONS, THE FAILED
BANKS, THE FAILED PENSION PLANS
236. One or more of the Failed Banks, Failed Credit Unions and Failed Pension Plans
purchased MBS and/or CDOs and incurred millions of dollars of losses on such securities
based on Defendants’ material omissions and misrepresentations, false statements and
claims. As a result of Defendants’ knowing, deliberate and reckless actions and the
losses sustained by such entities from the purchase of the MBS and CDOs, such entities
failed and the U.S. Government has had to pay millions of dollars in connection with the
failure of such entities.
5. DAMAGES FROM AIG BAILOUT
237. AIG purchased or insured billions of dollars of MBS and CDOs and incurred
billions of dollars of losses on such securities based on Defendants’ material omissions
and misrepresentations, false statements and claims. AIG entered into credit default
swaps with Barclays in which Barclays obtained insurance from AIG on hundreds of
millions of dollars of CDOs based on Defendants’ material omissions and
misrepresentations, false statements and claims with respect to such CDOs. Under the
Maiden Lane III transaction, Barclays was paid $600 million for the insured CDOs and
Barclays was allowed to retain the $900 million of cash collateral previously posted by
AIG in exchange for terminating the credit default swaps ($1.5 billion total).
238. Also, AIG entered into securities lending arrangements with Barclays where AIG
obtained cash from Barclays and AIG purchased Barclays MBS based on Defendants’
material omissions and misrepresentations, false statements and claims. Barclays was
paid $7 billion from Treasury funds used to bail out AIG and to repay AIG’s securities
lending counterparties.
86
239. As a result of Defendants’ knowing, deliberate and reckless actions and the losses
sustained by AIG, on September 16, 2008, the Federal Reserve provided AIG with an
$85 billion credit line. In addition, on October 3, 2008, AIG received a $37.8 billion
bailout from the Treasury under the Troubled Asset Relief Program (TARP). On
November 25, 2008, AIG received an additional $40 billion under TARP and on March
2, 2009, AIG received an additional commitment of $29.8 billion under TARP, in each
case as a result of Defendants’ misconduct described herein. Because the Government
had billions invested in AIG through various government programs, the Government
suffered losses (or forgone profits) on these investments due to the damage caused to
AIG by Defendants’ misconduct described herein.
VIII. CLAIMS FOR RELIEF
A. For Damages And Penalties Under The False Claims Act

(31 U.S.C. § 3729(a)(1) (2006), and, as amended, 31 U.S.C. § 3729(a)(1)(A))
240. Relator incorporates by reference the allegations in each of the preceding
paragraphs as if fully set forth in this paragraph.
241. As set forth above, Defendants knowingly, or acting with deliberate ignorance
and/or with reckless disregard of the truth, omitted to disclose material information and
made false representations about the quality of the mortgage loans included in the MBS
at the time of their sale to the trustee for the benefit of the certificate holders of the
related MBS trust and omitted to correct these material omissions and false
representations thereafter.
242. As set forth above, Defendants knowingly, or acting with deliberate ignorance
and/or with reckless disregard of the truth, omitted to disclose material information and
made false representations about the quality of the MBS and RMBS securing the CDOs
87
and the mortgage loans securing such MBS at the time of sale to the related CDO and
omitted to correct these material omissions and false representations thereafter.
243. As set forth above, Defendants knowingly, or acting in deliberate ignorance or in
reckless disregard for the truth, presented and/or caused to be presented, a false or
fraudulent claim for payment or approval in connection with the sale of the mortgage
loans to the MBS, the sale of the MBS and other RMBS to the CDOs and the sale of the
MBS and the CDOs to the Government Purchasers.
244. Defendants’ misrepresentations and omissions were capable of influencing, and
thus were material to, the Government Purchasers’ decisions about purchasing, financing,
insuring or guaranteeing, directly or indirectly, the MBS and the CDOs.
245. The U.S. Government has purchased or financed, insured or guaranteed, directly
or indirectly, the purchase of the MBS and the CDOs through many Government
Purchasers, including, without limitation, through purchases by the Failed Credit Unions,
the Failed Banks, the Failed Pension Plans, the FRBNY, PPIFs, the Maiden Lane
Entities, the Federal Home Loan Banks, AIG, U.S. Treasury, and Fannie Mae and
Freddie Mac. Each such purchaser is “a contractor, grantee, or other recipient” within the
meaning of 31 U.S.C. § 3729(b)(2). In addition, the U.S. Government funds used to bail
out the Failed Credit Unions, the Failed Banks, the Failed Pension Plans, AIG and Fannie
Mae and Freddie Mac, and to finance the PPIFs and the Maiden Lane Entities, were used
to “advance a Government program or interest,” within the meaning of 31 U.S.C. §
3729(b)(2). The U.S. Government “reimbursed” such purchasers of the MBS and CDOs
for damages they suffered from the false and fraudulent claims for payment made by
88
Defendants. The U.S Government has incurred losses as a direct result of the
Defendants’ misrepresentations and omissions
246. By virtue of the acts described above, and in violation of 31 U.S.C.
§3729(a)(l)(A), for each of the mortgage loans sold to the MBS that failed to conform to
the disclosures in the Registration Statements or failed to conform to the representations
and warranties made by the Defendants in the pooling and servicing agreements,
representations and warranties agreements, assignment and assumption agreements or
similar documents such as trust agreements or mortgage loan purchase agreements,
Defendants knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, presented and/or caused to be presented a fraudulent claim for payment or
approval.
247. Pursuant to the False Claims Act, 31 U.S.C. § 3729(a)(l), Defendants are liable to
the United States under the treble damage and civil penalty provisions for a civil penalty
of not less than $5,500 and not more than $11,000 for each of the false or fraudulent
claim herein, plus three (3) times the amount of damages which the U.S. Government has
sustained because of Defendants’ actions.
B. For Damages And Penalties Under The False Claims

Act U.S.C. § 3729(a)(2)(2006), and, as amended, 31 U.S.C. § 3729(a)(1)(B)
249. As set forth above, Defendants’ knowingly, or acting in deliberate ignorance or in
reckless disregard for the truth, made, used, or caused to be made or used, false records
and/or statements material to false or fraudulent claims in connection with the sale of the
mortgaged loans to the trustee on behalf of the Certificate holders of the MBS, the sale of
89
the RMBS and other mortgage collateral to the CDOs and the sale of the MBS and the
CDOs to the Government Purchasers.
250. Defendants’ misrepresentations and omissions were capable of influencing, and
thus were material to, the Government Purchasers’ decisions about purchasing, financing,
insuring or guaranteeing, directly or indirectly, the MBS and the CDOs.
251. U.S. Government funds have been used to purchase the MBS and the CDOs and
to reimburse the losses incurred by the Government Purchasers from their purchases of
the MBS and the CDOs. The U.S Government has incurred losses as a direct result of the
Defendants’ misrepresentations and omissions.
§3729(a)(1)(B), for each of the mortgage loans sold to the MBS that failed to conform to
the disclosures in the Registration Statements or failed to conform to the representations
and warranties in the pooling and servicing agreements, representations and warranties
agreements, assignment and assumption agreements or similar documents such as trust
agreements or mortgage loan purchase agreements, Defendants knowingly, or acting in
deliberate ignorance and/or with reckless disregard of the truth, made, used, or caused to
be made or used, false records and/or statements material to false or fraudulent claims.
253. Pursuant to the False Claims Act, 31 U.S.C. § 3729(a)(1), Defendants are liable to
of not less than $5,500 and not more than $11,000 for each of the false or fraudulent
claims herein, plus three (3) times the amount of damages which the U.S. Government
has sustained because of Defendants’ actions.
90
C. For Damages And Penalties Under The False Claims Act
(31 U.S.C. § 3729(a)(7)(2006), and, as amended, 31 U.S.C. § 3729(a)(1)(G))
255. As set forth above, Defendants knowingly, or acting in deliberate ignorance or in
reckless disregard for the truth, concealed or improperly avoided or decreased their
obligations to repurchase defective mortgage loans from the MBS trusts in accordance
with their obligations as disclosed in the Registration Statements and/or under the pooling
and servicing agreements, assignment and assumption agreements, representations and
warranties agreements or similar documents such as trust agreements or mortgage loan
purchase agreements.
§3729(a)(1)(G), for each of the mortgage loans sold to the MBS that failed to conform to
the representations and warranties in the pooling and servicing agreements,
representations and warranties agreements, assignment and assumption agreements or
similar documents such as trust agreements or mortgage loan purchase agreements,
Defendants knowingly, or acting in deliberate ignorance and/or with reckless disregard of
the truth, concealed or improperly avoided or decreased its obligation to repurchase
defective mortgage loans from the MBS trusts.
257. Pursuant to the False Claims Act, 31 U.S.C. § 3729(a)(1), Defendants are liable to
of not less than $5,500 and not more than $11,000 for each mortgage loan it improperly
failed to repurchase, plus three (3) times the amount of damages which the U.S.
Government has sustained because of Defendants’ actions.
91
IX. PRAYER FOR RELIEF
WHEREFORE, the Relator respectfully requests that judgment be entered in its favor and
against Defendants as follows:
(a) On Counts One, Two and Three (False Claims Act), a judgment against all
Defendants for treble damages and civil penalties for the maximum amount
allowed by law;
(b) For an award of costs pursuant to 31 U.S.C. § 3729(a) and 31 U.S.C. § 3730(d);
and
(c) For such further relief that the Court deems just.
X. DEMAND FOR TRIAL BY JURY
The Relator respectfully demands a trial by jury for all issues so triable as a matter of
right.
RESPECTFULLY SUBMITTED this ___ day of ____, 2016.
By:___________________________
Francis P. Karam, Esq.
Law Office of Francis P. Karam
175 Varick Street, #345
New York, NY 10014
Phone: (212) 489-3900
E-Mail: frank@fkaramlaw.com
Counsel for Relator
92
Annex A
MBS
This list is deemed to include any MBS trusts sponsored, underwritten or sold by
Barclays that are not listed here.
93
Annex B
CDOs
Pampelonne CDO II, Ltd.

Markov CDO I, Ltd
Tricadia CDO 2003-1, Ltd.
This list is deemed to include any CDOs sponsored, underwritten or sold by Barclays that are not
listed here
94
Annex C
Failed Credit Unions
2014
Life Line Credit Union Inc.
Health One Credit Union
Mayfair Federal Credit Union
Parsons Pittsburg Credit Union
St. Francis Campus Credit Union
2013
Bagumbayan Credit Union
Polish Combatants Credit Union
Mayfair Federal Credit Union,
Craftsman Credit Union,
Greater Oregon Federal Credit Union
Taupa Lithuanian Credit Union
PEF Federal Credit Union
Zane Trace Federal Credit Union,
Ochsner Clinic Federal Credit Union
First Kingdom Community Credit Union
Electrical Workers #527 Federal Credit Union
Lynrocten Federal Credit Union
Shiloh of Alexandria Federal Credit Union
I.C.E. Credit Union
Pepsi Cola Federal Credit Union
Amez United Credit Union
NCP Community Development Federal Credit Union
New Covenant Missionary Baptist Church Credit Union
2012
Border Lodge Credit Union
G.I.C. Federal Credit Union
Olean Federal Credit Union
Chetco Federal Credit Union
Women’s Southwest Federal Credit Union
El Paso Federal Credit Union
United Catholic Credit Union
Eastern New York Federal Credit Union
People for People Community Development Credit Union
Saguache County Credit Union
Shepherd’s Federal Credit Union
Wausau Postal Employees Credit Union
95
Telesis Community Credit Union
A M Community Credit Union
2011
Oakland Municipal Credit Union
Family First Federal Credit Union
NYC OTB Federal Credit Union
Wisconsin Heights Credit Union
Land of Enchantment Federal Credit Union
Mission San Francisco Federal Credit Union
Utah Central Federal Credit Union
Hmong American Federal Credit Union
Valued Members Federal Credit Union
St. James A.M.E. Federal Credit Union
Borinquen Federal Credit Union
Vensure Federal Credit Union
2010
Kern Central Credit Union California
Friendship Community Federal Credit Union Mississippi
Mutual Diversified Employees Federal Credit Union California
Lawrence County School Employees Federal Credit Union PA
South End Mutual Benefit Association, Inc. Connecticut
Tracy Federal Credit Union California
St. Paul’s Croatian Federal Credit Union Ohio
Convent Federal Credit Union New York
Orange County Employees Credit Union Texas
Southwest Community Federal Credit Union Utah
Norbel Credit Union Utah
Certified Federal Credit Union California
Kappa Alpha Psi Texas
First American Credit Union Wisconsin
Industries Puerto Rico Federal Credit Union Puerto Rico
Phil-Pet Federal Credit Union Texas
The Union Credit Union Washington
Constitution Corporate Federal Credit Union Connecticut
Beehive Credit Union
2009
Heritage West Federal Credit Union

Fairfield County Ohio Federal Employees Credit Union
Ensign Federal Credit Union
Second Baptist Church Credit Union
West Texas Credit Union
Members Own Credit Union
Clearstar Federal Credit Union
Comunidades Federal Credit Union
96
Kaiser Lakeside Credit Union
Free Choice Federal Credit Union
Community One Credit Union
Watts United Credit Union
High Desert FCU
Rouge Employees Credit Union
Center Valley Federal Credit Union
2008
West Hartford CU
N&W Poca Division FCU
Texdot WF Credit Union
Kaiperm FCU
Interfaith FCU
Port Trust FCU
New London Security FCU
Meriden F.A. FCU
Cal State 9 Credit Union
Sterlent Credit Union
Father Burk FCU
St. Luke Babtist FCU
Norlarco Credit Union
Valley Credit Union
High Desert FCU
2007
Homeowners Association Credit Union

Huron River Area CU
Green Tree CU
New Horizons Community Credit Union:
Cambria CU
Sharebuilders CU
State & Parish Employees FCU
2006
Marian Miami FCU

Mt. Hebron Babtist FCU
La Casa Federal Credit Union
Dedicators Federal Credit Union
I.L.A. 24 CU
Orleans Public Schools FCU
Punjab and Sindh FCU
Yankton Employee CU
Potter’s House CU
97
St. Charles Borromea Church CU
St. John Babtist CU
Greater Harrisburg Community CU
2005
Good Samaritan Employees CU

Lorain Sacred Heard CU
Korean-American Chamber of Commerce CU
Jilapuhn Employees FCU
Homesteaders CU
Lock Haven Area FCU
Jamaica Postal Credit Union
Miss-Lou Federal Credit Union
Randolph Country FCU
Ko-Am FCU
98
Annex D
Failed Banks
First Cherokee State Bank
Georgia Trust Bank
The Royal Palm Bank of Florida
Glasgow Savings Bank
Montgomery Bank & Trust
The Farmers Bank of Lynchburg
Security Exchange Bank
Putnam State Bank
Waccamaw Bank
Farmers’ and Traders’ State Bank
Carolina Federal Savings Bank
First Capital Bank
Alabama Trust Bank, National Association
Security Bank, National Association
Palm Desert National Bank
Plantation Federal Bank
Inter Savings Bank, fsb D/B/A InterBank, fsb
HarVest Bank of Maryland
Bank of the Eastern Shore
Fort Lee Federal Savings Bank, FSB
Fidelity Bank
Premier Bank
Covenant Bank & Trust
New City Bank
Global Commerce Bank
99
Home Savings of America
Central Bank of Georgia
SCB Bank
Charter National Bank and Trust
BankEast
Patriot Bank Minnesota
Tennessee Commerce Bank
First Guaranty Bank and Trust Company of Jacksonville
American Eagle Savings Bank
The First State Bank
Central Florida State Bank
Western National Bank
Premier Community Bank of the Emerald Coast
Central Progressive Bank
Polk County Bank
Community Bank of Rockmart
SunFirst Bank
Mid City Bank, Inc.
All American Bank
Community Banks of Colorado
Community Capital Bank
Decatur First Bank
Old Harbor Bank
Country Bank
First State Bank
Blue Ridge Savings Bank, Inc.
Piedmont Community Bank
Sun Security Bank
100
The RiverBank
First International Bank
Citizens Bank of Northern California
Bank of the Commonwealth
The First National Bank of Florida
CreekSide Bank
Patriot Bank of Georgia
First Choice Bank
First Southern National Bank
Lydian Private Bank
Public Savings Bank
The First National Bank of Olathe
Bank of Whitman
Bank of Shorewood
Integra Bank National Association
BankMeridian, N.A.
Virginia Business Bank
Bank of Choice
LandMark Bank of Florida
Southshore Community Bank
Summit Bank
First Peoples Bank
High Trust Bank
One Georgia Bank
Signature Bank
Colorado Capital Bank
First Chicago Bank & Trust
Mountain Heritage Bank
101
First Commercial Bank of Tampa Bay
McIntosh State Bank
Atlantic Bank and Trust
First Heritage Bank
Summit Bank
First Georgia Banking Company
Atlantic Southern Bank
Coastal Bank
Community Central Bank
The Park Avenue Bank
First Choice Community Bank
Cortez Community Bank
First National Bank of Central Florida
Heritage Banking Group
Rosemount National Bank
Superior Bank
Nexity Bank
New Horizons Bank
Bartow County Bank
Nevada Commerce Bank
Western Springs National Bank and Trust
The Bank of Commerce
Legacy Bank
First National Bank of Davis
Valley Community Bank
San Luis Trust Bank, FSB
Charter Oak Bank
Citizens Bank of Effingham
102
Habersham Bank
Canyon National Bank
Badger State Bank
Peoples State Bank
Sunshine State Community Bank
Community First Bank Chicago
North Georgia Bank
American Trust Bank
First Community Bank
FirsTier Bank
Evergreen State Bank
The First State Bank
United Western Bank
The Bank of Asheville
CommunitySouth Bank & Trust
Enterprise Banking Company
Oglethorpe Bank
Legacy Bank
First Commercial Bank of Florida
Community National Bank
First Southern Bank
United Americas Bank, N.A.
Appalachian Community Bank, FSB
Chestatee State Bank
The Bank of Miami,N.A.
Earthstar Bank
Paramount Bank
First Banking Center
103
Allegiance Bank of North America
Gulf State Community Bank
Copper Star Bank
Darby Bank & Trust Co.
Tifton Banking Company
First Vietnamese American Bank
Pierce Commercial Bank
Western Commercial Bank
K Bank
First Arizona Savings, A FSB
Hillcrest Bank
First Suburban National Bank
The First National Bank of Barnesville
The Gordon Bank
Progress Bank of Florida
First Bank of Jacksonville
Premier Bank
WestBridge Bank and Trust Company
Security Savings Bank, F.S.B.
Shoreline Bank
Wakulla Bank
North County Bank
Haven Trust Bank Florida
Maritime Savings Bank
Bramble Savings Bank
The Peoples Bank
First Commerce Community Bank
Bank of Ellijay
104
ISN Bank
Horizon Bank
Sonoma Valley Bank
Los Padres Bank
Butte Community Bank
Pacific State Bank
ShoreBank
Imperial Savings and Loan Association
Independent National Bank
Community National Bank at Bartow
Palos Bank and Trust Company
Ravenswood Bank
LibertyBank
The Cowlitz Bank
Coastal Community Bank
Bayside Savings Bank
Northwest Bank & Trust
Home Valley Bank
SouthwestUSA Bank
Community Security Bank
Thunder Bank
Williamsburg First National Bank
Crescent Bank and Trust Company
Sterling Bank
Mainstreet Savings Bank, FSB
Olde Cypress Community Bank
Turnberry Bank
Metro Bank of Dade County
105
First National Bank of the South
Woodlands Bank
Home National Bank
USA Bank
Ideal Federal Savings Bank
Bay National Bank
High Desert State Bank
First National Bank
Peninsula Bank
Nevada Security Bank
Washington First International Bank
TierOne Bank
Arcola Homestead Savings Bank
First National Bank
Sun West Bank
Granite Community Bank, NA
Bank of Florida - Tampa
Bank of Florida - Southwest
Bank of Florida - Southeast
Pinehurst Bank
Midwest Bank and Trust Company
Southwest Community Bank
New Liberty Bank
Satilla Community Bank
1st Pacific Bank of California
Towne Bank of Arizona
Access Bank
The Bank of Bonifay
106
Frontier Bank
BC National Banks
Champion Bank
CF Bancorp
Westernbank Puerto Rico
R-G Premier Bank of Puerto Rico
Eurobank
Wheatland Bank
Peotone Bank and Trust Company
Lincoln Park Savings Bank
New Century Bank
Citizens Bank and Trust Company of Chicago
Broadway Bank
Amcore Bank, National Association
City Bank
Tamalpais Bank
Innovative Bank
Butler Bank
Riverside National Bank of Florida
AmericanFirst Bank
First Federal Bank of North Florida
Lakeside Community Bank
Beach First National Bank
Desert Hills Bank
Unity National Bank
Key West Bank
McIntosh Commercial Bank
State Bank of Aurora
107
First Lowndes Bank
Bank of Hiawassee
Appalachian Community Bank
Advanta Bank Corp.
Century Security Bank
American National Bank
Statewide Bank
Old Southern Bank
The Park Avenue Bank
LibertyPointe Bank
Centennial Bank
Waterfield Bank
Bank of Illinois
Sun American Bank
Rainier Pacific Bank
Carson River Community Bank
La Jolla Bank, FSB
George Washington Savings Bank
The La Coste National Bank
Marco Community Bank
1st American State Bank of Minnesota
American Marine Bank
First Regional Bank
Community Bank and Trust
Marshall Bank, N.A.
Florida Community Bank
First National Bank of Georgia
Columbia River Bank
108
Evergreen Bank
Charter Bank
Bank of Leeton
Premier American Bank
Barnes Banking Company
St. Stephen State Bank
Town Community Bank & Trust
Horizon Bank
First Federal Bank of California, F.S.B.
Imperial Capital Bank
Independent Bankers’ Bank
New South Federal Savings Bank
Citizens State Bank
Peoples First Community Bank
RockBridge Commercial Bank
SolutionsBank
Valley Capital Bank, N.A.
Republic Federal Bank, N.A.
Greater Atlantic Bank
Benchmark Bank
AmTrust Bank
The Tattnall Bank
First Security National Bank
The Buckhead Community Bank
Commerce Bank of Southwest Florida
Pacific Coast National Bank
Orion Bank
Century Bank, F.S.B.
109
United Commercial Bank
Gateway Bank of St. Louis
Prosperan Bank
Home Federal Savings Bank
United Security Bank
North Houston Bank
Madisonville State Bank
Citizens National Bank
Park National Bank
Pacific National Bank
California National Bank
San Diego National Bank
Community Bank of Lemont
Bank USA, N.A.
First DuPage Bank
Riverview Community Bank
Bank of Elmwood
Flagship National Bank
Hillcrest Bank Florida
American United Bank
Partners Bank
San Joaquin Bank
Southern Colorado National Bank
Jennings State Bank
Warren Bank
Georgian Bank
Irwin Union Bank, F.S.B.
Irwin Union Bank and Trust Company
110
Venture Bank
Brickwell Community Bank
Corus Bank, N.A.
First State Bank
Platinum Community Bank
Vantus Bank
InBank
First Bank of Kansas City
Affinity Bank
Mainstreet Bank
Bradford Bank
Guaranty Bank
CapitalSouth Bank
First Coweta Bank
ebank
Community Bank of Nevada
Community Bank of Arizona
Union Bank, National Association
Colonial Bank
Dwelling House Savings and Loan Association
Community First Bank
Community National Bank of Sarasota County
First State Bank
Mutual Bank
First BankAmericano
Peoples Community Bank
Integrity Bank
First State Bank of Altus
111
Security Bank of Jones County
Security Bank of Houston County
Security Bank of Bibb County
Security Bank of North Metro
Security Bank of North Fulton
Security Bank of Gwinnett County
Waterford Village Bank
Temecula Valley Bank
Vineyard Bank
BankFirst
First Piedmont Bank
Bank of Wyoming
Founders Bank
Millennium State Bank of Texas
First National Bank of Danville
Elizabeth State Bank
Rock River Bank
First State Bank of Winchester
John Warner Bank
Mirae Bank
MetroPacific Bank
Horizon Bank
Neighborhood Community Bank
Community Bank of West Georgia
First National Bank of Anthony
Cooperative Bank
Southern Community Bank
Bank of Lincolnwood
112
Citizens National Bank
Strategic Capital Bank
BankUnited, FSB
Westsound Bank
America West Bank
Citizens Community Bank
Silverton Bank, NA
First Bank of Idaho
First Bank of Beverly Hills
Michigan Heritage Bank
American Southern Bank
Great Basin Bank of Nevada
American Sterling Bank
New Frontier Bank
Cape Fear Bank
Omni National Bank
TeamBank, NA
Colorado National Bank
FirstCity Bank
Freedom Bank of Georgia
Security Savings Bank
Heritage Community Bank
Silver Falls Bank
Pinnacle Bank of Oregon
Corn Belt Bank & Trust Co.
Riverside Bank of the Gulf Coast
Sherman County Bank
County Bank
113
Alliance Bank
FirstBank Financial Services
Ocala National Bank
Suburban FSB
MagnetBank
1st Centennial Bank
Bank of Clark County
National Bank of Commerce
Sanderson State Bank
Haven Trust Bank
First Georgia Community Bank
PFF Bank & Trust
Downey Savings & Loan
Community Bank
Security Pacific Bank
Franklin Bank, SSB
Freedom Bank
Alpha Bank & Trust
Meridian Bank
Main Street Bank
Washington Mutual Bank (Including its subsidiary Washington Mutual Bank FSB)
Ameribank
Silver State Bank
Integrity Bank
Columbian Bank & Trust
First Priority Bank
First Heritage Bank, NA
First National Bank of Nevada
114
IndyMac Bank
First Integrity Bank, NA
ANB Financial, NA
Hume Bank
Douglass National Bank
Miami Valley Bank
NetBank
Metropolitan Savings Bank
Bank of Ephraim
Reliance Bank
Guaranty National Bank of Tallahassee
Dollar Savings Bank
115

BArclays RMBS Complaint

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BArclays RMBS Complaint

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

A. RELATOR’S INFORMATION ..............................................................................9

II. PARTIES ...............................................................................................................................15

A. THE PLAINTIFF ..................................................................................................15

B. THE RELATOR ....................................................................................................15

C. THE DEFENDANTS ............................................................................................15

D. THE NON-PARTY ORIGINATORS ...................................................................17

E. THE GOVERNMENT PURCHASERS................................................................17

III. JURISDICTION AND VENUE ...........................................................................................18

IV. CONDITIONS PRECEDENT .............................................................................................18

V. FACTS COMMON TO ALL COUNTS ...............................................................................20

A. MBS BACKGROUND .........................................................................................20

B. THE BARCLAYS RMBS PROCESS...................................................................22

C. THE BARCLAYS CDO PROCESS .....................................................................26

D. RELATOR’S LOAN-LEVEL NATIONWIDE REVIEW OF THE

E. THE BORROWERS AND COLLATERAL PROPERTIES ................................31

F. DEFENDANTS FAILED TO TIMELY TRANSFER LOANS TO THE MBS

VI. DEFENDANTS’ USE OF FALSE RECORDS AND/OR STATEMENTS ........................51

A. DEFENDANTS MISREPRESENTED MATERIAL INFORMATION WITH

1. DEFENDANTS FALSELY CLAIMED THAT NO LTV or CLTV

B. DEFENDANTS AFFIRMATIVELY MISREPRESENTED PROPER

D. DEFENDANTS FAILED TO COMPLY WITH UNDERWRITING

E. DEFENDANTS OMITTED AND MISREPRESENTED MATERIAL

1. BARCLAYS PURCHASED CREDIT PROTECTION FROM AIG AND

F. DEFENDANTS CONTROLLED AND DIRECTED EVERY STEP OF THE

G. SALES OF RMBS TO AIG UNDER AIG’S SECURITIES LENDING

A. PURCHASES BY THE U.S. GOVERNMENT....................................................81

B. DAMAGES TO THE U.S. GOVERNMENT IMPAIRED VALUE OF MBS .....82

1. IMPAIRED VALUE OF MBS ..................................................................82

2. IMPAIRED VALUE OF CDOS ...............................................................84

3. DAMAGE TO FANNIE MAE AND FREDDIE MAC ............................85

4. DAMAGES TO THE FAILED CREDIT UNIONS, THE FAILED

5. DAMAGES FROM AIG BAILOUT ........................................................86

VIII. CLAIMS FOR RELIEF .....................................................................................................87

IX. PRAYER FOR RELIEF .......................................................................................................92

action against Defendants BARCLAYS BANK PLC (“BARCLAYS BANK”); SUTTON

FUNDING LLC (“SUTTON”); BCAP LLC (“BCAP”); BARCLAYS CAPITAL INC.

(“BARCLAYS CAPITAL”) and BARCLAYS CAPITAL REAL ESTATE INC. (“HOMEQ

SERVICING”)(collectively or individually, “Barclays” or “Defendants”) alleging as follows:

Defendants’ creation and sale of certain residential mortgage-backed securities

devising and creating a method of presenting the enormous amount of information in an

3. Relator was an employee of a competitor of Defendants during the period 2000-

Defaults Swaps, and profiting from each business.

4. Relator learned of diminishing standards in the mortgage and mortgage security

value of the collateral properties were secondary and tertiary considerations. To

5. Relator learned of the packaging of unsellable securities (including RMBS

creating CDOs from piles of unsellable securities (including RMBS). Unsellable

securities arose from a number of issues, including lack of liquidity or a market,

mortgage loan assignments were recorded.

Department of Justice Asks Relator to be a “Whistleblower”

7. Based on information provided by Relator, the Department of Justice (“DOJ”)

a follow-on to that whistleblower request.

of the collateral properties.

9. Relator advised DOJ of various means of corroborating the information he

supplied. These means included obtaining internal emails and Bloomberg

communications which would show Defendants’ employees were aware of un-

creditworthy borrowers, overvalued collateral properties and flawed execution (“flawed

Defendants’ extension of “warehouse” credit lines to various mortgage originators, as

Relator’s information and demonstrate Defendants’ awareness of the flawed mortgages.

Defendants’ current and former employees who could be interviewed to corroborate

Relator’s information and followed all of Relator’s recommendations.

include: (1) Defendants’ concealment of borrowers names and collateral property