CHICAGO – Attorney General Lisa Madigan announced a $22.5 million settlement with Morgan Stanley as a result of the investment bank’s misconduct in its marketing and sale of risky residential mortgage-backed securities leading up to the 2008 economic collapse.

The settlement with Morgan Stanley stems from an investigation by Madigan’s office concerning the investment bank’s failure to disclose the true risk of RMBS investments.

“This settlement is the latest effort in my ongoing commitment to recover critical funds for the state due to Wall Street’s massive mortgage fraud,” Madigan said.

Under the settlement, Morgan Stanley will pay $22.5 million to Illinois. It will be distributed among the Teachers Retirement System of the State of Illinois, the State Universities Retirement System of Illinois, and the Illinois State Board of Investment, which oversees the State Employees’ Retirement System, General Assembly Retirement System and Judges’ Retirement System.

Thursday’s settlement is the fourth agreement Madigan has secured as part of her work on the Residential Mortgage-Backed Securities Working Group under President Obama’s Financial Fraud Enforcement Task Force. Madigan has reached similar agreements with JPMorgan Chase & Company for $100 million to Illinois’ pension systems, with Citigroup for $44 million to the state’s pension systems and an additional $40 million in consumer relief, and with Bank of America for a record $300 million, including $200 million to Illinois’ pension systems and an additional $100 million in consumer relief.