Posted on 22 Feb 2011
The largest publicly traded U.S. home and auto insurer, Allstate Corp., filed a lawsuit against sued units of Citigroup Inc. and Deutsche Bank AG over claims they fraudulently sold hundreds of millions of dollars of mortgage-backed securities.
According to complaints filed on Friday in New York state Supreme Court in Manhattan, Allstate is seeking to recover the lost market value of the securities, as well as principal and interest payments.
Allstate said it bought more than $200 million of the securities, backed by residential mortgages, from the Citigroup defendants and about $185 million from the Deutsche Bank units after relying on misrepresentations and omissions regarding underwriting standards, owner occupancy data and loan-to-value ratios.
"Allstate was made to believe it was buying highly rated, safe securities,” the Northbrook, Illinois-based company said in its complaint against New York-based Citigroup. “Defendants knew the pools were toxic mixes of loans extended to borrowers who could not afford the properties and thus were highly likely to default.”
Alexander Samuelson, a Citigroup spokesman, and Scott Helfman, a spokesman for Frankfurt-based Deutsche Bank, declined to immediately comment.
Allstate, which accuses the banks of common-law fraud and negligent misrepresentation, filed a similar complaint Feb. 15 against JPMorgan Chase & Co. over $700 million of mortgage- backed securities.