The Resolution Law Group: Judge Dismisses Shareholder Lawsuit Suing Bank of America For Allegedly Concealing AIG Fraud Case

A judge has thrown out a securities lawsuit by shareholders accusing Bank of America Corp. (BAC) of concealing that insurer AIG (AIG) intended to file a $10 billion fraud case against it. U.S. District Judge John Koeltl in Manhattan said that BofA and four of its officers were not obligated to reveal in advance that the lawsuit was pending or that it was a large one.

AIG filed its securities fraud lawsuit against Bank of America in 2011. The insurer claimed that the bank misrepresented the quality of over $28 billion of mortgage-backed securities it purchased not just from the bank but also from its Merrill Lynch (MER) and Countrywide units. On the day that the complaint was filed, shares of Bank of America dropped 20.3% and Standard & Poor’s revoked the tripe-A credit rating it had issued.

The shareholder plaintiffs claim that the bank’s officers, including Chief Executive Brian Moynihan, knew about the MBS fraud case six months before the lawsuit was submitted and they should have given them advance warning.

Judge John Koeltl, however, said that the specifics about the securities case did not materially differ from what Bank of America already disclosed in its mortgage exposures. He also determined that the bank did not issue inaccurate or incomplete statements.

AIG’s mortgage-backed securities lawsuit is still pending.

Meantime, the media is reporting that the AIG may be getting ready to file another MBS fraud case, this one against Morgan Stanley (MS). The case would be over the $3.7 billion of mortgage securities that the bank sponsored and underwrote between 2005 to 2007 that AIG then bought. The insurer has submitted a regulatory filing about its plans to possibly file. AIG ended a “tolling agreement” with the firm that would have allowed them to resolve their disagreement outside a courtroom.

The Resolution Law Group’s mortgage-backed securities lawyers represent institutional and individual investors that have sustained financial losses because of securities fraud. Contact our MBS fraud law firm today.

Judge Dismisses Suit Against Bank of America For Not Disclosing AIG Claims, Insurance Journal, November 4, 2013

The Resolution Law Group: Attorney Generals Want Securities Cases Against Standard Poor’s To Go Back to State Courts

The attorneys general of Washington, Arizona, South Carolina, Arkansas, Pennsylvania, Colorado, North Carolina, Delaware, Missouri, Idaho, Maine, Mississippi, Indiana, Tennessee, and Iowa want their securities casesagainst Standard & Poor’s Rating Services and its parent company The McGraw-Hill Companies Inc. sent back to their state courts. They contend that the cases don’t have federal jurisdiction.

The AGs submitted their consolidated brief in the U.S. District Court for the Southern District of New York. They say that the states’ respective complaints are exclusively state law action causes and the credit rating agency can’t use affirmative defenses to put together federal jurisdiction.

It was the U.S. Judicial Panel on Multidistrict Litigation that moved the 15 state securities lawsuits against Standard & Poor’s to New York’s federal court. Panel chairman Judge Kathryn Vratil, who presides over the U.S. District Court for the District of Kansas, said that they had determined that the “actions involve common question of fact” and centralizing them would be more convenient and expedient for everyone involved. One common “question of fact” was over whether the credit rater “intentionally misrepresented” that its structured finance securities analysis was unbiased, autonomous, and not impacted by its business ties with securities issuers.

The states, however, believe that transferring the cases to NY, where S & P is located, would be an inconvenience to them, and considering that there has been “cooperation” among AGs, this was not necessary. The AGs believe that comity principals are in favor of the federal court turning down jurisdiction and remanding the securities cases to the state courts.

The majority of the lawsuits were filed on the same day that the US Justice Department filed its own complaint against S & P. The government claims that the credit rating giant inflated the ratings of mortgage investments to “defraud” investors and this contributed to the securities’ failing. The DOJ is accusing S & P of making misrepresentations about the objectivity and independence of these ratings.

Last month, a judge declined to throw out the DOJ’s securities fraud case accusing S & P of submitting a defense that was “puffery.” The company had argued that issuers, investors, legislators, and regulators should not have depended on public statements it made about procedures for offering unbiased credit ratings that were supposedly based on data and free from conflicts of interest.

S & P and other credit raters, such as Moody, have been contending with a number of credit rating fraud lawsuits related to the ratings they issued going back to the financial crisis. Claiming that the agencies concealed risks involved and inflated the ratings, investors want the losses they sustained back. Questions continue to be raised over whether the credit raters put their business interests over investors’ best interests.

AGs urge federal judge to return cases against Standard & Poor’s to state courts, Legal News Online, August 19, 2013

If you feel you are the victim of Securities Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

 

The Resolution Law Group: US gov’t accuses Bank of America of civil fraud in sale of $850M of mortgage bonds in 2008

WASHINGTONThe U.S. government has accused Bank of America Corp. of civil fraud, saying the company failed to disclose risks and misled investors in its sale of $850 million of mortgage bonds during 2008.

The Justice Department filed a lawsuit Tuesday against the bank and several subsidiaries in federal court in Charlotte, N.C., where Bank of America is based. The Securities and Exchange Commission filed a related lawsuit against Bank of America there, too.

Bank of America disputed the allegations.

The lawsuits accuse the second-largest U.S. bank of misleading investors about the risks of the mortgages tied to the securities.

And the government said the bank failed to tell investors that more than 70 percent of the mortgages backing the investment were written by mortgage brokers outside the banks’ network. That made the mortgages more vulnerable to default, they said. The bank disclosed the percentage of such mortgage loans in the investment only to a select group of investors, the suits alleged.

Bank of America could face monetary penalties. The government didn’t specify how much it is seeking, but it estimated that investors lost more than $100 million on the deal.

Bank of America’s CEO at the time described those mortgages as “toxic waste,” the SEC said.

“Bank of America’s reckless and fraudulent … practices in the lead-up to the financial crisis caused significant losses to investors,” Anne Tompkins, the U.S. attorney for the Western District of North Carolina, said in a statement. “Now, Bank of America will have to face the consequences of its actions.”

Bank of America said it will refute the government’s allegations in court.

“These were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that,” company spokesman Lawrence Grayson said in a statement. “The loans in this pool performed better than loans with similar characteristics (made and packaged into securities) at the same time by other financial institutions.”

“We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result,” Grayson added.

The action was brought by a financial-fraud enforcement task force set up to pursue cases related to the 2008 financial crisis. The Justice Department lawsuit marks the most high-profile action brought by the Obama administration over conduct related to the financial crisis since the department sued credit rating agency Standard & Poor’s in February. That lawsuit alleged that S&P knowingly inflated its ratings of risky mortgage investments ahead of the crisis.

S&P, a unit of McGraw-Hill Cos., has rejected the allegations.

The actions against S&P and Bank of America followed years of criticism that the government had failed to do enough to hold accountable those companies that contributed to the crisis.

When the real estate bubble burst in 2007, home values plunged and millions of people defaulted on their mortgages and lost their homes. Investors who bought securities backed by high-risk mortgages lost billions. Regulators have said that inaccurate statements by banks in packaging and selling mortgage bonds contributed to the investors’ losses.

The lawsuit “marks the latest step forward in the Justice Department’s ongoing efforts to hold accountable those who engage in fraudulent or irresponsible conduct,” Attorney General Eric Holder said.

Bank of America received $45 billion in federal bailout aid during the crisis. It became one of the biggest players in the mortgage market through its acquisitions of Merrill Lynch and Countrywide Financial, which wrote many high-risk mortgages that contributed to the crisis.

Bank of America has been dogged by litigation largely as a result of those acquisitions. The bank has had to pay tens of billions of dollars to settle class-action lawsuits and previous actions brought by the SEC.

If you feel you are the victim of Mortgage Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

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The Resolution Law Group: District Judge Not Inclined to Toss $5B Securities Fraud Case Against Standard & Poor’s

A U.S. district judge in California has put out a tentative decision in the $5B fraud lawsuit against Standard & Poor’s indicating that he will likely reject a motion to dismiss the civil case against the credit rating agency. Judge David Carter said he needs more time to come up with his final ruling, which is expected on July 15, but for now, he is turning down S & P’s request to toss out the case outright.

Federal prosecutors sued S & P contending that the credit rater chose not to alert investors that the housing market was failing in ‘06 and inflated high-risk mortgage investments’ ratings. The Obama Administration said the ratings agency did not act fast enough to put downgrade a large number of subprime-backed securities despite realizing that home prices were dropping and borrowers were finding it hard to pay back loans. Instead, collateralized debt obligations and mortgage-backed securities continued to receive elevated ratings from the top credit rating agencies, allowing banks to sell trillions of these investments.

Contending that the credit rater committed fraud by making false claims that its ratings were objective, the US Department of Justice wants S & P to pay $5 billion in penalties, The government believes that between 9/04 and 10/07, S & P delayed updating both its ratings criteria and analytical models, which means the requirements were weaker than what analysts say should have been necessary to ensure their accuracy. During this time, S & P credit rated about $1.2 trillion in structured products related to $2.8 trillion worth of mortgage securities and charged up to $750 per rated deal. The government says that this means that S & P saw the investment banks that put out the securities as its primary customers.

Now, S & P wants the MBS case thrown out, contending that the lawsuit is too broad and doesn’t offer enough specific examples of the alleged fraud. The credit rating agency maintains that the statements federal prosecutors say are the allegedly fraudulent misrepresentations are ones that investors were not supposed to take at face value and, therefore, they cannot be grounds for the securities fraud case.

Also, S & P’s legal defense says that just like other market participants, including the US Treasury, the credit rating agency did not have the ability to predict how severe the ensuing “catastrophic meltdown” would be and, if anything, this showed a “lack of prescience” rather than fraud.

However, Judge Carter in his tentative ruling, did say that S & P’s statements in employee conduct codes and official policy statements about its standards and processes for ratings deals aren’t just “mere aspirational musings,” but instead are “specific assertions of policies… in stark contrast” to conduct that the government is alleging occurred.

If you feel you are the victim of Mortgage Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud