SACRAMENTO – Attorney General Xavier Becerra announced a $125 million settlement with the Royal Bank of Scotland Group, or RBS, an international financial conglomerate, over misrepresentations about residential mortgage-backed securities sold to California's public employee and teacher pension funds, CalPERS and CalSTRS, respectively.

Mortgage-backed securities are complex investments which include thousands of mortgage loans of potentially varying quality, where the buyer typically relies on assurances that the loans have been carefully screened and are not too risky.

An investigation conducted by the Attorney General's Office found that the descriptions of these mortgage-backed securities to investors failed to accurately disclose the true characteristics of many of the underlying mortgages, and that due diligence to remove poor quality loans from the investments was not adequately performed.

RBS was aware of the misrepresentations but failed to correct them. This resulted in millions in losses to CalPERS and CalSTRS.

“RBS decided to mislead California’s pension funds in order to line its own pockets – plain and simple,” said Attorney General Becerra.

He said the settlement returns to the pension funds, which hardworking Californians rely on upon retirement, money that RBS wrongfully took from them.

The settlement with RBS is the latest action by the California Department of Justice to recover losses suffered during the financial crisis and to hold accountable the institutions that contributed to it.

To date, the Attorney General's Office has recovered more than $1 billion for California’s public pension funds.