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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

NATIONAL CREDIT UNION ADMINISTRATION V.

* * * CIVIL NO. WMN-97-4222 (Magistrate Judge Gauvey)

FIRST UNION CAPITAL MARKETS CORP., et al.

* MEMORANDUM AND ORDER

This case arises out of the sale of collaterized mortgage obligations (CMOs) and repurchase agreements that occurred between September 1993 and January 1995. During that time period

the defendants, First Union Capital Markets Corp. (First Union) and John FitzHugh, sold the aforementioned securities to Capital Corporation Federal Credit Union, of Lanham, Maryland (CapCorp). In 1993 and 1994 CapCorp heavily invested in CMOs. In August

1993, 57% of CapCorp's investment portfolio (reflecting a value of $541 million) consisted of CMOs and in September 1994 that percentage rose to 75% reflecting a value of $1.1 billion. (Paper No. 48 at 2). The rise in interest rates that occurred in

1994 significantly decreased the marketability of CapCorp's CMOs. Accordingly, CapCorp's investment portfolio suffered an unrealized loss of approximately $100 million. NCUA, pursuant to

12 U.S.C.

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