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An International New York Court Battle over Breach of Fiduciary Duty

Posted on Jan 01, 2016

During the first week of April 2013, the Dubai bank Mashreq filed suit in New York against ING Groep and ING Investment Management, alleging fraud, breach of contract, and breach of fiduciary duty. ING Groep is the largest financial firm in the Netherlands. The lawsuit centers around $43 million in losses from investments in “bizarre illiquid securities.” Mashreq accuses ING of having made the investments against its expressed wishes.

In its filing, Mashreq alleges the following:

  • While investing with ING beginning in 2005, ING ignored Mashreq’s exposure limits on risky assets
  • ING put $108 million of Mashreq’s money into funding vehicles
  • Those funding vehicles, referred to as “roach models” in the complaint, later became known as the “most notorious of the global financial crisis.”
  • In 2006, ING attempted to get Mashreq to invest in a broader range of securities, including collateralized debt obligations (CDOs) and collateralized loan obligations (CLOs)
  • Mashreq expressly rejected these proposals and crossed out the language relating to the CDOs and CLOs
  • ING invested more than 70% of Mashreq’s portfolio into these securities regardless
  • The investments were in unregistered, fee-heavy pools of loans that were below investment grade and associated with conflicts of interest and an absence of oversight by any outside accountants
  • After later investigation, Mashreq says that it discovered ING had made many investments with shell companies without approval from the Securities and Exchange Commission. 

Mashreq was able to mitigate some of its losses by salvaging its investment in some of the securities that had their liquidity return. The bank is still, however, seeking a jury trial and punitive damages against ING for the remaining $43 million in losses.

Contact a New York business litigation attorney today at (888) 497-3410 for more information about breach of fiduciary duty and other business litigation matters.

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