(Adds details about lawsuit, settlement amounts.)
By Suzanne Barlyn
Jan 22 (Reuters) - A group of 11 banks agreed to pay morethan $63 million to settle allegations that they misled theCommonwealth of Virginia and its retirement system aboutresidential mortgage backed-securities, Attorney General Mark R.Herring said on Friday.
The banks, which include two Bank of America Corp units, Morgan Stanley and a unit of the Royal Bank ofScotland Group PLC, defrauded the state's retirementfund by selling it shoddy mortgage bonds in the run-up to thefinancial crisis, Virginia's attorney general said in a 2014lawsuit.
None of banks admitted liability in the settlement, Herringsaid.
The $63 million pact is the largest non-health care-relatedsum ever obtained in a suit brought under a Virginia law aimedat curbing fraud against the commonwealth's taxpayers, Herringsaid in a statement.
In the lawsuit, Herring said an analysis showed nearly 40percent of the mortgages that backed 220 securities purchased byVirginia's retirement fund were fraudulently represented asposing a lower risk of default than they actually did.
The fund, which bought the securities between 2004 and 2010,lost a total of $383 million when it was forced to sell thesecurities, the lawsuit said.
Herring had originally sought a total of $1.15 billion fromthe banks, or triple the commonwealth's damages, a penaltyallowed under the law at issue.
Two Bank of America units will together pay $19.5 million,the largest share of the settlement, followed by a Royal Bank ofScotland Group PLC unit ($10 million), a Barclays PLC unit ($9 million) and Morgan Stanley ($6.9 million).
Other banks in the settlement include units of Credit SuisseAG, Goldman Sachs Group Inc, Deutsche Bank AG, HSBCHoldings plc,, JPMorgan Chase & Co. and UBSAG.
A spokesman for HSBC said the bank is pleased to haveconcluded the matter. Representatives for the other banks eitherdeclined comment or could not be immediately reached forcomment. (Reporting by Suzanne Barlyn; Editing by Dan Grebler and AlanCrosby)
Barclays (BARC)
