Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc. are among 13 banks whose units were sued for $1.15 billion by Virginia over claims they misled the state’s retirement system about the sale of residential mortgage-backed securities.

The suit in state court in Richmond is the largest financial fraud case ever brought by the commonwealth, Virginia Attorney General Mark Herring said in a statement yesterday.

The sealed complaint was filed in January under the whistle-blower provisions of the Virgina Fraud Against Taxpayers Act by Integra REC LLC, a Texas-based financial modeling and analysis firm, and subsequently joined by the state. It was made public yesterday.

While “wrongful actions of a general nature” by the banks have been the subject of news media and government investigations, information provided by Integra enabled the state to identify which specific loans backing the securities were misrepresented to the Virginia Retirement System, according to the complaint.

Michael DuVally, a spokesman for Goldman Sachs, and Mark Costiglio, a spokesman for Citigroup, both based in New York, declined to comment on the lawsuit.

Bill Halldin, a spokesman for Charlotte, North Carolina-based Bank of America, also declined to comment.

‘Proprietary Algorithm’

Integra developed a proprietary algorithm that lets it match properties in official records with those in security offering documents that didn’t contain identifying information such as names and addresses, the state said.

“Loan level misrepresentations are then traced to specific RMBS tranches” bought by the retirement system, according to the complaint.

Integra’s analysis “confirms that the losses suffered by VRS are beyond those related to general market conditions and resulted directly from” the banks’ misrepresentations, the state alleged in in its filings.

President Barack Obama created a task force aimed at holding banks accountable for practices leading to the 2008 financial crisis. Several financial institutions, including some of those named in the Virginia litigation, have paid settlements to resolve federal and state investigations.

Last month, Bank of America agreed to pay almost $16.7 billion, a record amount, for misrepresenting the quality of bonds backed by home loans. Citigroup Inc. agreed to pay $7 billion in July while JPMorgan Chase & Co. struck a $13 billion accord in November over similar claims.

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