U.S. regulators, as part of a broad probe of how Wall Street firms bundled mortgage-linked financial products as the housing crisis worsened, notified a former Mizuho Financial Group Inc. executive he may be sued for his role in structuring the securities.
Alexander Rekeda, who was previously head of structured credit in the Americas at Mizuho, received a so-called Wells notice in October informing him that Securities and Exchange Commission staff intend to recommend enforcement action against him for allegedly making misrepresentations about a collateralized debt obligation, according to his public broker filings.
Rekeda was part of a group of about 10 traders who left Calyon, the investment-banking unit of Credit Agricole SA, in 2006 to join Mizuho, helping the lender ramp up its activity in U.S. mortgage-backed securities just as the housing market began to implode. As defaults on subprime home loans rose, Mizuho struggled to find buyers for its CDOs and had to absorb billions in losses as their values dropped.
Over the past three years, the SEC has targeted a range of firms and individuals for their role in creating and selling products linked to risky mortgages.
Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. have all been accused by the agency of failing to tell investors about such products' risks.
Mizuho came into the spotlight in September after Standard & Poor's, the largest provider of credit ratings, said it could face SEC claims related to the top grade it gave in 2007 to a $1.6 billion CDO the bank underwrote. The CDO, known as Delphinus, was downgraded within six months of receiving the top grade, and by the end of 2008, it was rated junk.